Procurement Management: Strategic Sourcing at British Airways

This report presents a case study on procurement management, focusing on British Airways. It begins with an abstract summarizing the study's theoretical perspectives, which rely on analytical models and empirical approaches. The analysis examines British Airways' sourcing methods and supplier base, highlighting the importance of strategic sourcing in the airline industry. The study reviews literature on procurement management, product cycles, and the need for strong quality control. It proposes a strategic sourcing framework to enhance procurement excellence and value growth. The report discusses the role of stakeholders, including suppliers and the procurement department, and the importance of effective communication and collaboration. The study also covers the use of global sourcing, just-in-time methods, and outsourcing services. The report concludes by emphasizing the significance of strategic procurement in driving profitable growth and offers a comprehensive analysis of British Airways' procurement strategies and their impact on the airline's operations and financial performance. It also provides an overview of the company's supplier base, the sourcing methods employed, and the strategic framework that can lead to procurement excellence and value growth within the organization.

Running head: PROCUREMENT MANAGEMENT
Procurement Management: A Case Study of British Airways
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Abstract
The theoretical perspectives of this study is relied on the analytical models as well as
empirical approaches. By field of study into the procurement management, the study is based
on review of literature examined the strategic sourcing methods and supplier base of selected
organization, British Airways. The case study of British Airways is consistent with the
literature based on conception of product cycles, in combination with the higher non-
recurring cost, and there is required of strong quality control which are considered as features
of procurement for selected airline industry. It benefits application of the longer term
partnerships as well as absence of the sourcing methods as well as supplier base. As world
becomes more integrated as well as globalized, the business sources are changing and there
are significant changes into their process of sourcing and supplier base. Due to increase of
competition into the airline industry, there is an increase of domestic as well as international
outsourcing which leads to increase of procurement management functions. In contrast with
the business enterprise of British Airways, there are two stakeholders such as supplier and
employer. The procurement process is involved with five stakeholders such as: “Maintenance
department, technical authority validated for the business requirements, department of
procurement, suppliers as well as logistic deports”. There is appropriate provision of cost
effective as well as excellence products as fuel of any of airline industry in addition to need
of a lot of harmony among all the stakeholders. However there is also overall excite of
stakeholders about each other shows that there is a absence of message attached with an
situation deficient of belief in addition to cooperation. The airline is hired of consultants
those help to create of supply chain framework to manage of airline services.
Keywords: Procurement management, Supplier base, sourcing methods, Procurement
Department, Supply chain framework.

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Table of Contents
1.0 Introduction..........................................................................................................................3
1.1 Aim of the study..........................................................................................................3
2.0 Background of the company................................................................................................3
3.0 Literature review and analysis.............................................................................................4
3.1 Examine sourcing methods and supplier base.................................................................4
3.2 Propose a strategic source framework which can lead to procurement excellence and
value growth...........................................................................................................................8
4.0 Conclusion..........................................................................................................................11
References................................................................................................................................13

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1.0 Introduction
Kleymann and Seristo (2017) discussed that procurement management is a process to
purchase of goods as well as services from the external suppliers. It is provided of completed
procurement processes and procedures, that is explained how to purchase from the suppliers.
The selected industry for this paper is airline industry and selected organization is British
Airways. Into the airline industry, the procurement management shows a key part to attain
complex level of effectiveness throughout improved procurement strategies. It is key source
of investments into the selected group as well as demands for improved management. Garg
(2016) stated that procurement starts with identifying needs and ends with provision
requirements into right quantities at particular time with right amount of quality. The airline
industry saves throughout stronger purchasing for decades and with decline of unit revenues,
the procurement management steps to next levels (Chang et al. 2015). Within the airline
industry, capital is considered as major cost driver and therefore a better procurement strategy
is required to increase flexibility and lower the fixed cost. The low cost carrier are gained of
savings strategies while there is flexible to demands to increase of customer base.
1.1 Aim of the study
The aim of this particular paper is to analyse of sourcing methods besides supplier base
along with recommend of strategic source framework which can principal to procurement
superiority in addition value growth.
2.0 Background of the company
British Airways is full service global airline that is presenting of lower fares with
widespread global way to their customer base. The selected organization is largest airline
within UK based on their size of fleet. The airline is based in Waterside near the main hub of
the London Heathrow Airport. The company is spent of £5.2 billion of the purchasing goods

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as well as services from the suppliers (Britishairways 2017). The industry is procured of
goods as well as services throughout strategic sourcing process with use of benchmarking to
ensure to gain of higher customer value at purchasing point as well as supplier contract.
3.0 Literature review and analysis
This section is established of theoretical framework as well as provided of an overview on
the empirical studies related to strategies outsourcing and supplier base. It is also provided of
strategic source outline which can principal to procurement quality in addition value. The
study is started with the sourcing issues and methods which are followed by the British
Airways. The theoretical perspectives of this study is relied on the analytical models as well
as empirical approaches (Iatrou and Oretti 2016). The aim is to provide an overview regarded
to the sourcing strategies and supplier base.
3.1 Examine sourcing methods and supplier base
Due to continued globalization as well as decrease into the transactional cost, there is
an increase of importance of the sourcing functions. The main aspect of sourcing is
integration of buying strategic decisions of the organization as it is promoted of trust as well
as decreased into the transactional cost. Wassmer and Madhok (2017) stated that there is
potential for the cost takeout, therefore sourcing is being focused on the cost avoidance. As
capital is major cost driver for the airline industry, therefore there should be requirement of
procurement strategy besides use of correct levers increase into suppleness while lowering of
the fixed costs. There are various factors which leads to sourcing strategies are as follows:
Timing: Demand began to fall in the year 2000 and there is acceleration after the
terrorist attacks in 2001 in US. Gaudenzi and Bucciol (2016) analyzed that there are lower
cost airlines saw opportunities and there is renew as well as increase into the fleets, in some
of the cases there is also lower charge by buying used aircrafts since the legacy airlines. It is

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showing of leverage potential of political as well as economic climate. The companies can
able to strengthen market positions by an increase to understand how the external forces can
affect the industry.
Simplification of specifications as well as increase of volume: British Airways
acquire of fuel effectual fleet, simplifications can able to carry value engineering, increase
into operative efficiency as well as flexibility into the sourcing process. Scheffler, Schiele
and Horn (2016) explained that maintenance is increased of savings, as spare part stock
administration is being shortened, volumes are resulted into better rates besides the airlines
are being repaired and improved into fleet reliability.
Outsourcing services: He and Balmer (2017) stated that it leads to save into the cost
related to administrative, improves of flexibility into labour, gains of importance into
specialized labour like IT, maintenance as well as repair. The services such as passenger
handling are allocated to the exterior agencies, when work are not substitute to the
technology.
Marketing: Shaw (2016) argued that it is a part where the savings are increased by
means of subcontracting of costs to the partner airports. The airlines are marginal airports for
bids in contradiction of others, negotiation on the landing fees in addition assigning of
marketing costs to the selected partners.
Partnerships: By selecting of an alliance, the lower cost players are able to maintain
of flexibility advantage as well as stay concerned on expense control, airport services, IT
marketing and other expense related with the alliance participation. The lower cost carrier has
limited partnerships (Ellis 2016).
The sourcing methods which are used as follows:

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Global sourcing: Into the British Airways, global sourcing method is used which
consisted of two main points such as: production units serve of market and how raw materials
are supplied for the production as well as research and development, manufacturing
departments. Burghouwt (2016) stated that this sourcing strategy is related to the foreign
suppliers requires of higher purchasing based on the wholesalers as well as suppliers. Global
outsourcing leads to lower price, higher standard products as well as higher quality.
Wassmer, Li and Madhok (2017) argued that there is also increase of global competition
among the company, global sourcing of the airline components as well as raw materials and
the finished products are increased.
Just-in-time: Park et al. (2018) analyzed that most of the companies are adopted of
just-in-time approach for making improvement over cost as well as quality. It makes a closer
relationship among the raw material suppliers as well as companies. The UK airways are
taking concepts of the lean manufacturing for making improvement over inventory as well as
creating of effective workflows. The airline is hired of consultants those help to create of
supply chain framework to manage of airline services.
Apart from the sourcing, there is a huge supplier base into the airline industry. The
procurement department is recorded in addition measured of risks across the supplier. British
Airways is one of such organization that is undergoes of strategic changes into the
procurement management department. Williams (2017) discussed that the changes are
implemented in effort to enhance of different business operations to promote of client
satisfaction as well as realize of objectives. British Airways has inbound logistics operations
that are complex and it is involved with timely delivery of fleets and catering of the products.
In order to provide a better supplier base, the company is ensured about freshness of their
foods. Therefore, the company is achieved of competitive advantage throughout
establishment of on-going relationships with the supplier. Kamau and Stanley (2015)

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demonstrated that the supplier operations of business is involved with preparing of good
services to sell to the customers. As UK’s largest airline industry, British Airways is flied to
more than 400 destinations. The business scope operations is quite extensive. The company
has competitive advantage towards offering of better customer services by providing of quick
check-in-services and online booking services to the customers.
Lawton (2017) concluded that into the outbound logistics, the company is sending of
ready products to the customers for purpose of consumption. It is related to manufacturing
companies, as it is applicable towards providing of airline services. British Airways is flied to
80 countries and it is gaining of supplier base by effective handling of baggage to the
destination along with advanced informational as well as communicational system. Pearson
et al. (2015) analyzed that the company is also provided of post sales services which is
consisted of product installation, handling of complaints regards to the products, services. In
the year 2015, the airline industry is introduced of 136 scanners at the check-in desk,
therefore the airline is also committed towards the financial investments in a proper as well as
systematic way to enhance of various aspects of service provision.
Kim and Mauborgne (2014) investigated that at end of the year 1999, British Airways
is spending of £4 billion a year with the suppliers. The company is required to inspect its
procurement purposes in order to accomplish of savings goal with £1.4 billion by the year
2006. British Airways is used of technology to tackle of it has directs spend, improvement
over direct procurement and accounts for £1 billion in spend. Gao, Yu and Cannella (2017)
analyzed that the company is changed of impressive results just savings such as there is
reduction within UK preferred with the supplier base of 14,000 to 2,500. The company is
doing 80 percentage of its purchasing services through electronic mode. Ko (2016) concluded
that procurement is about processing of the orders as well as strategic sourcing which helps to
get of best quality products at better prices.

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3.2 Propose a strategic source framework which can lead to procurement
excellence and value growth
Pearson and Merkert (2014) stated that a strategic source framework creates of
sustainable cos advantages for the businesses. Into the airline industry, the strategic source
framework leads to procurement excellence as well as value growth. It leads to increase into
product diversity, shortening of the product life cycles, fluctuate into the materials,
commodities prices as well as growth into regulatory pressures.
Using the strategic management theory, it carries out strategic management analysis
of British Airways, evaluation of business strategies, its performance, future capabilities
along with success and failure rates. Pacheco and Dean (2015) found that by strategic
management, British Airways success is resulted into consistent maintenance of their lower
cost, operational effective positions and developed of strategic understanding to defend of
niche into the air travel market. The services which British Airways are provided to the
customers is being differentiated form the services provided by other airlines. Therefore, the
price of fares are not determined by considering of service type factors (Whyte and Lohmann
2015). The budget airlines keep of turnover margins by moving the cost to grow the business.
Therefore, the airline is continued to choose of strategic choices to improve the offered
product, enhance of better service delivery to the customers and reduce of cost to cope up
with the competitive challenges.
Using Resource based theory, it pulls consideration towards the strategic value of
their workforces besides issues into the workplace learning. It provides a soft opinion of the
human resource management. Brueckner and Luo (2014) posited that sustainable competitive
advantage is not being realised throughout study of the external marketplace situation. It also
stipulates the fundamental sources as well as drivers to competitive advantage of the market

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and performance is associated with resources as well as its capabilities, information and
knowledge that are controlled by the firm. Vellas (2016) highlighted need for fit among
outside market in which the company is operated besides inner capabilities in perspective of
internal environment of the airline industry.
Using contingency theory, it is stated that the management and decisions are based on
other things to become effective for the organization. Morrison and Gillen (2017) discussed
that the management approach is contingent on the organizational situations on the
organizational situations and unprecedented occurrence are tend to interfere. Pearson and
Merkert (2014) asserted that the contingency theory is represented of organizational decision
making perspective as well as organizational structure. Into the contingency theory, the
organizational success into planned choices decisions are taken into considerations for the
factors related to the strategic choices decisions included of strategic competitiveness,
organization related challenges, organizational structure as well as leadership dynamics
among the continence’s which reflects the organizational situations.
Using organizational behaviour theory, it helps to adopt of effective process which
allows the organization to keep with changing into the industry trends. The organizational
behaviour is discussed with importance of organizational functions to make improvement
over productivity as well as performance of company in changing environments (Wassmer
and Madhok 2017). In order to make success into the airline industry, it creates of
competitive benefit over the competitors, it is compulsory for the organization to grow of
positive corporate culture along with actual leadership process for employees to effect of
behaviours towards the job as well as company into confident ways. Gaudenzi and Bucciol
(2016) discussed that motivation is required among the employees to gain of success and
profitability among the organizational functions. Maslow’s hierarchy of need motivation
theory stated that five needs of the individuals are fulfilled as it is related to satisfaction in

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addition to motivational level. British Airways served the physiological requirements of their
employees by providing them a stable employment than sustained. The company is boosted
of self-esteem as well as confidence of their employees by letting them to participate into the
operational decisions Pearson et al. 2015). By self-actualization, the company educated that
key to increase of presentation levels is creating of intelligence of real meaning for the
workers. The company also provides of safety needs by proving them with adequate medical
as well as retirement benefits. They also ensured about safety of their job and also financial
security. Finally, creating of better company culture for the employees lead to provide and
meet with belongings needs.
The internal environment analysis of British Airways has unique qualities from its
competitors, and most prevalent is execution of targeted customer’s services. The company is
marketed towards the individuals which view the airline as nothing more than the
transportations such as customers are seek of quick and reliable services without hassle. This
particular company is created of market for the businessmen as well as women and frequent
flyers. Wassmer and Madhok (2017) discussed that apart from all this, British Airways is
provided of another qualities such as unique emphasis on the work culture worker attitudes.
With an innovative hiring style, the company is managed to attain and train of unskilled as
well as energized workers that envy into entire industry. The workers are taken as primary
drivers towards customer retention as well as efficiency of customer services which drive of
profitability of the firm. The company is streamlined of the business models to value of its
cost efficiency and seek to reduce luxury costs. Whyte and Lohmann (2015) analyzed that
standardized parts as well as reduction of training for maintain of crew is resulted into
improved into bottom line. The target market of British Airways is consisted of young,
middle and short distance travellers. The technology into flight is begin to offer of shorter