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Lufthansa Group on the up with E-Procurement

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Lufthansa Group on the up with E-Procurement the way we do it Lufthansa Group on the up with e-procurement Lufthansa AG is one of the airline companies that have been affected the least by the global crisis. An important reason for this is the consistent efficiency strategy adopted by the Group, which plays a central role in its procurement processes. The company has built a high-performance e-procurement platform, which not only enables significant cost savings, but also optimizes sustainable procurement processes. The Lufthansa Group operates on This success is founded on a a global scale with around 400 company strategy that consistently subsidiaries and associated companies focuses on quality, efficiency and in over 80 countries and more than cost optimization. Procurement 108,000 employees. The company is an important strategic part of is split into five business segments this approach, as at the last check; comprising Logistics, Maintenance Lufthansa's annual procurement Repair Overhaul, Catering, IT Services volume amounted to an impressive and the Passenger Airline Group. EUR 15 billion. The Group recognized Despite difficult economic conditions, at an early stage that a sustainable 2008 saw Deutsche Lufthansa AG cost reduction in the procurement match its previous year's results and department is not possible report an operating profit of around without efficient processes EUR 1.35 billion. that are standardized with a high- the e-Procure-to-Pay-Portal LUPUS performance IT infrastructure. Since (Lufthansa Procurement System), which the turn of the millennium, Lufthansa is supported by SAP ERP solution and has therefore focused on the an Intranet portal. The technological development of appropriate solutions. and procedural foundation of LUPUS forms the basis for solutions offered by Electronic procurement to IBX on-demand platform. promote efficiency Gerold Carl has been employed at "The adoption of the LUPUS portal, Lufthansa AG in various management based on IBX on-demand Platform The adoption of the positions for over 20 years and has offers significant advantages with regard LUPUS“ portal, based on IBX been involved in this development to costs and quality", explains Carl. on-demand platform offers from the very beginning. The data "Not only can we largely automate significant advantages with processing specialist, who has an the classic procurement processes, regard to costs and quality,” academic background participated in but services that cannot be catalogued explains Carl. ”Not only can we the implementation of the Purchase or standardized can also be brought largely automate the classic Card. This formed the starting point in line with e-procurement, thereby procurement processes, for the initial concepts of a Group-wide improving the networking between the but services that cannot be e-procurement solution, which was procurement and logistic departments". catalogued or standardized introduced in 2001. Today, as General can also be brought in line Manager, Gerold Carl is responsible for Massive cost reduction with eProcurement, thereby the strategic e-procurement carried out Meanwhile, the 35 largest businesses improving the networking by the German airline company. in the Lufthansa Group have adopted between the procurement and the IBX on-demand solution, with logistic departments. "Working closely with our Group's over 5,000 operators using the finance department, we have analyzed platform at 87 sites across the world. Gerold ”Carl, procurement within the Group and Over 300 associated suppliers not Director e-Purchasing Deutsche identified optimization potentials only offer conventional products, but Lufthansa AG for processes that the procurement also complex services for marketing, department previously did not focus facility management and handling visa on", said Carl. "The results of this applications in over 150 integrated analysis were incorporated into catalogues. All in all, orders for the construction of a complex IT indirect goods and services amounting architecture, which covers the entire to over half a billion euro have been procurement process". This process processed via LUPUS. Functions such comprises the areas of Strategy/ as catalogue and content management, Planning, Sourcing, Procurement, supplier network management, Fulfillment and Payment. For the order and system administration last three areas, Lufthansa set up were brought together in a Lufthansa Shared Service Centre employing eight people. The use of IBX on-demand technology, which started in 2000 and was significantly extended in 2007, has led to a significant reduction in costs: while a standard procurement requisition (BANF) via SAP costs on average over EUR 100 (order plus invoice), an order made via LUPUS costs less than EUR 10. Since this time, 96 percent of items ordered are processed automatically via catalogues in LUPUS while only four percent are still processed manually. The invoicing processes are also integrated. The 2 Procurement Services the way we do it increase in efficiency is also reflected Outlook: shaping the future of concentrates its activities on the core in personnel costs: "Over the years procurement competencies in its five strategic we have been able to almost halve the Lufthansa is one of the companies business segments—the passenger number of staff", said Carl. "Without that is already well advanced in the airline business, logistics, MRO, e-procurement we would now be implementation of its e-procurement catering and IT services—all of which facing a serious personnel resource strategy. "The foundations have play a leading role in the industry problem". definitely been built, but we cannot they operate. More than 70 million come to a standstill", emphasizes passengers flew with airlines in the However, the reduced costs are Carl. On one hand, this concerns the Lufthansa Group to 242 locations just one advantage of the system: user-friendliness of the e-procurement in 87 countries. Lufthansa is also at the same time, the procurement systems, which has to move in the continuing to develop its cooperation department is relieved of routine direction of B2C applications, such with its partners. The 21 airlines in operative work and can dedicate as Google and Amazon. While on the Star Alliance, which Lufthansa more time to strategic tasks relating the other hand, the potential of also belongs to, fly to 1042 locations to the development and management developments such as Web 2.0 in 168 countries. of the supplier network. According and Cloud Computing must be to Carl: "Lufthansa's target value is checked with regard to electronic 'Zero BANF'; this means complete procurement, emphasized Carl. automation of the Procure-to-Pay In doing so, attention is primarily process. For structural reasons, we will focused on young users and future never quite reach the zero value, but employees, who expect these we hope to get as close as possible". technologies and can use them intuitively. Thomas Neubauer, Sales Strategic goal: Group-wide Director at Capgemini Procurement implementation of the system Services, sees future developments in Extending the positive impacts, the same way: "Just as our customers experienced with LUPUS by the are continuously advancing, we German Airlines in the Group, to other also constantly adapt our solutions areas in the Group, is something Carl to the demands of our customers sees as an important task. Intensive with regard to both technology and discussions and advocacy are required organization. Changing user behavior in Lufthansa AG, due to its de-centrally therefore plays an important role". organized structure. "We have to continuously test our solution and keep From a non-technological perspective, striving to find improvements, as this he views Shared Services—the is the only way we can convince our grouping of service processes into one colleagues of this approach", explains operationally independent entity—as a Carl. However, the benefits are clear, very fruitful concept for procurement. which is why Swiss International Air Finally, he has also indentified unused Lines has now also signed up and potential in supplier management project-oriented talks are already where logistics concepts such as the A typical day at Lufthansa: underway with Austrian Airlines. Vendor Managed Inventory (VMI) and Furthermore, there is great potential a stronger grouping of supplier services n 2250 take-offs and landings for using this solution: Lead Buyers are of interest. "The optimization every day who are employed by the Lufthansa of the procurement structure is an n Around 193,000 passengers Group assume the role of internal or ongoing process, but we are confident and over 5200 tons of freight are even external Group-wide experts that we are on the right path", transported every day responsible for the procurement of emphasizes Carl. n More than 1,170,000 meals are designated product groups. This means served around the world that services that are purchased multiple Basic information about the every day times within the Group can be bundled Lufthansa Group n Around 27,400 calls taken by together. The Lead Buyer negotiates Deutsche Lufthansa AG is a global the Service Centre every day strategic framework contracts for the aviation group and one of the largest n Over 1000 aircrafts supported whole Group and beyond. Contracts airlines in the world comprising every day also apply to members of Star Alliance around 400 subsidiaries and which comprises 21 airlines. associated companies. The Group 3 440 dedicated domain experts in procurement
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