Setting up an Airline Procurement Department at Jade Cargo International Co. Ltd. in Shenzhen, Peoples Republic of China, in cooperation with Lufthansa Cargo
Oct 03, 2015
Setting up an Airline Procurement Department
at Jade Cargo International Co. Ltd. in Shenzhen, Peoples Republic of China,in cooperation with Lufthansa Cargo
1Table of contents
? Lufthansa Cargo and Jade Cargo
? Initial situation at Jade Cargo
? Setting up the Procurement department
? Important rules and regulations for Procurement in the airline industry
2Table of contents
? Lufthansa Cargo and Jade Cargo
? Initial situation at Jade Cargo
? Setting up the Procurement department
? Important rules and regulations for Procurement in the airline industry
3Lufthansa Cargo Our service for you
? One of the leading airfreight companies worldwide
? Premium quality carrier
? Independent logistics company within the Lufthansa Group
? Airfreight airline with full product range
? Global networking of the most important markets
? Partnerships of the Lufthansa Cargo Group extend theworldwide route network
? Development of new industry and transport solutionstogether with customers
? Attractive employer in almost 100 countries
4Lufthansa Cargo Our current fleet stands for diversity
18 MD-11F ? Around 55% of the freight is transported onfreighters or through the purchase ofcapacities
Bellycapacity
? Around 45% of the freight is transported onthe total of around 440 aircraft of LufthansaPassage and Austrian Airlines
Furthercapacities
? In addition to the capacities on the MD-11 andthe Passage aircraft, use can also be made offurther capacities of partner companiesincluding six B747-400 ERF from Jade Cargo
5A Chinese All Cargo Airline with a Multinational Character
Three shareholders
? Shenzhen Airlines? Lufthansa Cargo? DEG (German Investment Corporation)
Jade Cargo Corporate Information
Employees of 42 Nationalities
? Chinese = 265 Employees? American = 29 Employees? German = 19 Employees? Brazilian = 16 Employees? Australian = 10 Employees? Korean = 9 Employees? South African = 3 Employees?
6Table of contents
? Lufthansa Cargo and Jade Cargo
? Initial situation at Jade Cargo
? Setting up the Procurement department
? Important rules and regulations for Procurement in the airline industry
7Comparison between lowering Procurement costs and increasing revenuesidentifies massive potentials in Procurement
? In order to equate the EBIT-effect of cutting Procurement costs by 2.5%, revenues would have todouble
Case exampleProcurement cost Revenue
+100%-2.5%
8Studies show remarkable annual savings in Procurement according todifferent levels of professionalization
Source: Arthur D. Little Purchasing Performance Excellence (PPE) Benchmarking Studies 2003 2009, N > 400
-1,2%
2,2%
5,0%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Follower
Median LeaderExcellency
Savings in %
9Table of contents
? Lufthansa Cargo and Jade Cargo
? Initial situation at Jade Cargo
? Setting up the Procurement department
? Important rules and regulations for Procurement in the airline industry
10
The main goal is to realize a global optimum for quality, technology, service,and cost in all projects which are related to external spend
? The main goal leads to sub goals:
? Saving cost
? Support all departments with procurement know-how
? Increasing transparency
? Providing an overview of external spend
? Early information to the finance department (cash planning)
? High quality of contracts
? Reliable and auditable processes
11
To achieve these goals the Procurement department is in the role of a serviceprovider and a challenger
? Service provider for each requesting department and the overall enterprise
? Support with procurement know-how
? Increasing transparency
? Early information for cash planning
? Reliable and auditable process
? Challenger of the requesting department
? Challenge specification
? Challenge potential supplier list
? Challenge evaluation matrix
? Challenge contract implementation
12
and will support each requesting department and the overall enterprisewith different tools and services
? Procurement teams? Consist of requesting and procurement department employees? Close cooperation and common targets? Decisions in consensus? Team leader from procurement
? Processes? Source to contract? Purchase to pay? Supplier management?
? Mandatory rules, regulations and forms? Procurement Guidelines signed by the CEO? Procurement request? Checklist for contract? Negative list?
? Recurrent audits
13
The Procurement teams and the close cooperation are the basis of theconcept
Attendee(roles)
Procure-ment team
MRO
Handling
IT
Generalpurchasing
Real estatemanagement
others likeGSA, ATC,ACMI,
1) Procurement has the commercial lead of the PT typically
1)
Always to be informed
Occasional member
Permanent member
Procurementdepartment
Purchaser inrequestingdepartment
Requestingdepartment Controlling LegalFinance
depending on situation
14
Table of contents
? Lufthansa Cargo and Jade Cargo
? Initial situation at Jade Cargo
? Setting up the Procurement department
? Some important rules and regulations for Procurement in the airline industry
15
Using the Source to Contract process contracts are concluded in a closecooperation between all related stakeholders of Jade Cargo
Contractsignatureprocess
According toGovernance
Contract inplace
Requestingdepartment
RfQ,negotiation,proposal ofawarding
ProcurementTeam
Approval gateawarding
Heads ofrequesting dept.and Procurement
Define RfQand potential
suppliers
ProcurementTeam
Approval gateRfQ
Heads ofrequesting dept.and Procurement
Definespecification
ProcurementTeam
Approval gatespecification
Heads ofrequesting dept.and Procurement
Procurementrequest
Requestingdepartment
Budgetcheck
Controlling
16
To support Jade Cargos business best, Procurement Guidelines wheredeveloped and set mandatory for the whole enterprise
? Procurement Guidelines describes the rules for procurement with different chapters:
? Target, Statement of validity, fundamentals
? Ethics of procurement:? Interest? Confidentiality? Fairness? Competition Compliance
? Cooperation in the procurement team and with other departments
? Involvement of the procurement department:? "With and Without involvement of the procurement department"
? Responsibilities
? Details of the process
?
17
Other important settings are beneficial for a professional procurement
? Four eyes principle
? Direct report to the CEO
18
Any confusion Any questions?
Thank you for your attention!Jens-Uwe RothrlSenior Procurement Manager MRO at Lufthansa Cargo andProcurement Consultant at Jade CargoeMail: [email protected] www.lufthansa-cargo.com