10/04/2017
Outstanding insight - airline procurement fails significantly to deliver results in the past years. An exceptional perspective on procurement performance at airlines delivered by McKinsey confirms the importance of strategic procurement with a focus on Category Management, Total Cost of Ownership and Life Cycle Cost.
A whole generation of procurement managers is still failing to implement Kraljic´s principles in procurement. The current focus of procurement discussions on automation and e-sourcing tools is drawing attention away from strategy. Just as the insufficient implementation of procurement tools and over-compliance are increasingly becoming the enemy of procurement.
We invite CPOs to compare purchasing spend vs. revenue vs. profit for the last 8 years and understand their procurement performance in the trend, not as absolute savings. Given the significant raw material price drop between 2011 and early 2016, there was a unique chance to improve your procurement performance. Did you take it?
Airlines have been saving through strong purchasing for decades. But with unit revenues declining, procurement must step up to the next level.