Boeing Australia Limited: Assessing the merits of implementing a sophisticated E-procurement System An Analysis

Made By:Harsh Gupta Prameet Gupta Harshit Saran Vaibhav Kumar Mridul Choudhary

Background of Boeing Australia Limited

Boeing Australia Limited conceived in 1966 Space and communication, site management, up gradation and maintenance of military aircraft and equipment. In 1999 BAL recruited a new national procurement manager, Russell Mener.

Statement of Issues Problem Areas Low productivity and high processing time in procurement processes is main issue in the BAL business process. Productivity, cost saving is reduced and processing time has increased.

The strategic relationship with large number and key suppliers is not maintained

There are financial and budgetary constraints to invest in a new expensive procurement system

 ADF, being military organization has its own legacy system that requires BAL to communicate via in-house data exchange Current legacy system at BAL is not supportive enough to provide real time availability of web based data as per request of ADF An upgrade to the procurement system will require training of staff and there is always resistance to a change

In order to continue to increase customers values BAL has to remain strategically competitive

Analysis
After analysing the BALs current procurement situation we have come to the following analysis.

Credit Card Purchase

Managing Supplier Relationships Information Systems Reverse Auction All the above areas can be enhanced

Credit Card Purchase: The credit card purchasing strategy is currently limited to indirect spend only.

Managing Supplier Relationships: The ADF mandated requirement of tractability of fly-away parts has initiated the process of certifying all suppliers. Information Systems: The current legacy systems of BAL though functional but does not have the capabilities of meeting the ADF requirements for real time, web based status reporting on contracted projects.

Material Management Process Council: The formation of MMPC at BAL is a strategic step to examine supply chain and procurement processes. The members of MMPC from different departments would provide cross-functional support to measure the baseline to establish the practices to streamline and simplify the procurement processes. Reverse Auction: Boeing US uses reverse auctions to procure items. BAL should work in this direction. Lead times could be affected and undermine existing relationships with strategic suppliers.

Roles and goals of the procurement team

In the circumstances mentioned in the case, the following are the main goals Gains in productivity Convert procurement process from manual to electronic

Improvement in the procurement process

Rationalization and management of supplier 1. Leveraging off the bargaining power of the group 2. Rationalization of suppliers 3. Selection of suppliers 4. Managing supplier relationships

Introducing credit card purchasing

Formulation of the material management process council Reverse auctioning

Alternative Options & Recommendations

Adopt and implement cost effective e-procurement system interfaced with legacy information system. More sophisticated procurement process Bulk buying in tandem with US Boeing. Use of a custom broker would also incur charges but they may mitigate the cost of having someone at BAL responsible for the process.

Conclusion: In conclusion, the difficulties BAL is currently experiencing with regard to procurement processes should be seen as a great opportunity to initiate a strategic approach to upgrade its procurement system. This would enable BAL to successfully meet the business requirements of its key and major customers. If a new sophisticated system is implemented successfully and in a timely manner, this will help BAL to improve its business process and operations, cost saving by reducing processing time, rationalization of a large number of BAL suppliers and maintaining strategic relationship with key suppliers.