BA makes online sourcing mandatory to save £300m

20 August 2003
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21 August 2003 | Robin Parker

Troubled airline British Airways has made e-sourcing compulsory for all spending to help shave £300 million from its procurement costs by 2005.

The company is also introducing a central online contract system, on which buyers can create contracts and receive and monitor suppliers' responses, with the aim of cutting the purchasing cycle by a quarter.

The move follows the introduction of mandatory online ordering through Ariba's e-procurement system at the end of March.

BA, hit by a wildcat strike by check-in staff at Heathrow last month over a new clocking-on system, is mid-way through a four-year plan to cut costs by £450 million and staff by 13,000.

It has already cut its supply base from 14,000 to 5,000 with a further 3,000 cuts planned by 2005.

The three-day strike is expected to lose BA up to £40 million in revenue.

Gavin Boswell, BA's e-sourcing programme manager, said better internal control of spend was vital to improving efficiency.

"Until now, contracts often expired without our knowledge. We should now be able to better understand the spend we have with our suppliers," he said.

"The cost reduction programme has been about finding more efficient ways of working, but beyond e-auctions, sourcing has gone untapped by technology until now."

BA has also completed its purchasing job cuts. With 150 staff, the procurement team is half the size it was when the review began two years ago. Boswell said there had been "some refinement" of purchasing job roles, with greater emphasis on specialist knowledge and category management.

The team will be expected to deliver £200 million of the £300 million savings target in 2004, effectively an eight-fold increase in savings per buyer from two years ago.

Meanwhile, BA is moving to placate travellers after it suspended flights to Saudi Arabia just days after US officials detained a passenger alleged to have tried to sell Russian missiles to an FBI agent posing as a Muslim terrorist.

It has also had the go-ahead to resume flights to Iraq, 13 years after they were halted.

SMaug2003

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