Global Economics

BA Saves $1B via Smarter Shopping


By streamlining buying procedures, Ariba software has helped British Airways' procurement department cut costs throughout the airline

British Airways has saved more than £500m by streamlining its buying procedures.

At the end of the 1990s, BA was spending more than £4bn per year with suppliers, processing in excess of 350,000 orders annually and processing more than half a million invoices.

Speaking at an Ariba event in London, Tim Richardson, general manager of procurement operations for BA, said back in 2000 the procurement department was in "complete disarray" - with too many staff, no clear buying procedures and around a quarter of staff not using preferred supplier lists.

The BA procurement department was subsequently overhauled - with staff numbers cut from 300 to 130 - and the Ariba procurement software brought in to deal with purchasing.

But the software was not immediately welcomed. BA tried to up the usage by sending out a warning letter to any member of staff attempting to order goods without using the new system.

Richardson said: "It started sending a signal to people that this is how things would soon be done."

As usage of the software moved up to the 50 per cent mark, the procurement department upped the ante and starting docking £10 from departments' budgets for each order raised that eschewed the new system.

After the charge was imposed 94 per cent of BA's staff used the software.

BA also brought in three 'golden rules' for all purchases to underpin the transformation programme.

These rules are: all orders must be raised and registered through the Ariba buyer software system, only preferred suppliers can be used, and for any purchase over £100,000 the supplier's name and information must be given.

The Ariba software is now used by 9,000 BA staff and the airline has reduced its cumulative running costs by more than £500m since 2000.

Provided by silicon.com—Driving Business Through Technology

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