BA sets ambitious spending target

9 March 2000
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09 March 2000 | Liam O'Brien

British Airways is set to increase its e-commerce activity dramatically and establish a portal site for the airline industry, similar to the one proposed by General Motors, Ford and Daimler-Chrysler for the automotive sector.

The airline aims to boost the proportion of its £3.7 billion annual purchasing spend that is accounted for by e-procurement from 25 per cent to 80 per cent within two years. The move is expected to cut this total by more than £175 million by March 2001 and will involve the phasing out of its electronic data interchange-based system.

BA said the bulk of the savings will come from increased leverage on its supplier base, which is being reduced from 14,000 to 2,000 suppliers by next March. Costs within this culled supplier base will be subject to intense scrutiny, said the company. The remainder of the savings will come from the elimination of off-contract business and process efficiencies.

The move, codenamed, coincides with plans to launch a portal, or online trading community, for the airline industry and is further proof that the portal trend is growing fast.

"An industry solution makes more sense than a company-led solution, in terms of content management and classification," said Jonathon Counsell, BA's general manager strategic development, purchasing and contracts, who is in charge of the project.

He added that there would not be job losses within the purchasing function. Instead, staff would be free to take on more strategic roles. The airline announced 1,000 job losses in November after it suffered a 43 per cent slump in interim profits, and earlier this year SM revealed that 20 per cent of BA's purchasing staff were at risk, following a corporate shake-up.

BA's target is seen as ambitious within the industry. David Rowell, purchasing manager at Britannia Airways, said: "There is not a lot of fat left in the suppliers' margins because BA is a formidable negotiator."

While Counsell acknowledged this, he said: "It's what we've got to do if we are to remain competitive. It seems ambitious today, but we may question the ambition in a year's time."

The selection of an e-commerce provider from a shortlist of two, believed to be Commerce One and Ariba, is expected in the next few weeks.


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