Redesigning procurement and supply chainsSpeaking as part of a panel on redesigning procurement and supply chains for the future, she warned that the “crisis is not over for the aviation industry”, as it will take around two years to adjust to the new normal, leading Lufthansa to adopt a new approach to procurement.
Qu explained: “We have recently launched a zero-based spend approach to work with our service companies, together with our internal product management design department to look at what is the minimum we need to keep the plane in the air.
Category management“We're looking at all sorts of categories from crew hotels, uniforms, lounges, customer services call centres. We've looked at all possible categories and worked with our suppliers to look at what we can do to reduce overall costs, reducing the costs for suppliers and at the same time reducing our operational costs.
“Everything is done as a very mutual agreement. We don't play the big guys on the market who say, 'You have to do this and that for us'.” Qu added Lufthansa’s approach had paid off with its suppliers, and going forward the airline will continue collaborating with service providers.
Switch to a “federated model” of procurement
Sopan Shah, chief procurement officer at InterContinental Hotels Group, said the pandemic had accelerated plans to switch to a “federated model” of procurement by the end of the year. “It meant our procurement team which was predominantly based outside of London, in the US and in Shanghai, would instead be based in 14 countries by the end of this year.”
Shah said the dramatic change would “drive an element of decentralisation” and allow the firm to be closer to its suppliers and supply chain, as well as to its hotels.
“We want to be closer to our franchisees and our hotels so that we can better service all of the aspects that we need to. Maybe by driving growth, helping them sign new hotels and opening new hotels or driving profitability from an operating costs perspective. Maybe it's having a more resilient, responsible supply chain by working with more local suppliers, more small-owned businesses, minority-owned businesses and LGBTQ businesses.”
The project allowed the firm to move a lot faster, but also presented challenges in the form of communication, Shah said.
“Technology is a great enabler as is collaboration through proper data, through leveraging the technologies from ML [machine learning], AI [artificial intelligence] to RPA [robotic process automation] activities to really build a foundation that is a global operating system for our procurement organisation, but allows us to be very local,” he said.