COVID-19 “Procurement take-off” of a leading European airline

Nothing flies: the entire fleet, consisting of more than 80 aircraft, had to stay on the ground and, due to the Covid-19 pandemic, no forecast as to a possible restart could be made. However, it was obvious that purchasing plays a key role not only in order to reduce costs, but also to sustainably increase competitiveness. The biggest challenge was at the same time the biggest opportunity of this project, expressed by the interesting question:

 

How can the airline and its suppliers re-position themselves for future business activities, in a way that synergies can be achieved? And how can innovative ideas be used for cost reduction purposes that can be realized in a timely manner?

Approach

A format was developed which focused on a close co-operation between airline and suppliers – and thus the whole value chain. In order to achieve sustainable cost reductions, an “innovation module” was additionally integrated, designed for the evaluation, discussion and financial assessment of new ideas. As an integrative framework, our 4-pillar principle was applied:

  • selection of potential suppliers, including internal pre-analysis
  • evaluation of internal measures, as well as ideas for cost reductions
  • development of an 360° communication package and dispatch to suppliers
  • conduct of innovation workshops & individual negotiations.

What was paramount: the holistic analysis of the supplier portfolio, in order to identify the right partners and at the same time start queries and evaluations. Furthermore, measures and potential cost savings had to be assessed. Besides the integration of the involved departments was important, to be able to meet suppliers in a self-assured manner.

Solution

The whole concept is based on the “open visor” idea in order to achieve a win-win scenario with suppliers. Equipped with a sound analysis, the suppliers' ideas and clear expectations, we then started the final “Supplier Innovation Day”, consisting of the following 3 basic steps:

  1. Evaluation of the ideas and measures submitted in advance, hybrid model of virtual & face-to-face negotiations
  2. workshops, final assessment of the ideas,
  3. conduct of the negotiation, with conclusive signing by both parties

As project result, we achieved more than 24% in cost reductions, while quality and service remained on the same level. This corresponds to a lever of invested consultant budget and result of >25. Moreover, the complete value chain was strengthened by the open and co-operative approach, which was reflected, inter alia, by a very positive feedback of the suppliers. 

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