50 Telecom Procurement Best Practices Research and Analysis1.

Spend Analysis What, When, Volume, Price, Whom, Approvals 2. Supply Options Vendor Landscape (Local, Regional, Global) 3. Risk Analysis- Vendor, Country, Component, Material 4. Tax and Duty Analysis Savings in Bundling, Country of Origin, Local Content, Green

Procurement Strategy, Models and Options5. Global, Regional, Local, Strategy 6. Category Plans Strategy, Terms and Conditions 7. Global Category Consolidation Country by Country Analysis Standardize on Low Cost 8. Breaking up Categories Cut vendor markups and direct purchase of third party items 9. Multivendor Strategy Dual Vendor Strategy 10. Benchmarking Internal vs. External, Make vs. Buy Analysis 11. Business Model Outsourcing, Leasing, Capex vs. Opex, Vendor Financing 12. Risk and Reward- Outcome Based , Revenue Sharing with Vendors

Vendor Selection Process and Vendor Relationship Management13. Vendor Prequalification Process Relevant Criteria, No Criteria Biasness 14. Tiered Vendor Rankings Preferred Vendor Status 15. Vendor Rationalization Few Strategic Vendors 16. Vendor Awards, Certifications 17. Investment in Vendor, Acquiring Vendors, Backward Integration 18. Collaborating with Competitors for Vendor Development 19. Forecast Sharing with Delivery Commitments 20. Vendor Innovation Day 21. Vendor Factory/ Facility Visits 22. Details of Vendors Key Subcontractors and Quality Audit

Pricing and Discounts 23. Reverse Auction Indicative Volume and Result Commitment 24. Target Pricing 25. Volume Commitment with discounts 26. RFP Process 27. Quarterly updated price list 28. Discount Coupons for future purchases

Contracts and Terms and Conditions 29. Long term contracts with flexibility of renegotiation 30. Legal Inputs Taken Showstoppers 31. Contract Compliance Management Trackable 32. Amendments Approval, Uploaded, Trackable 33. MSA , Statement of Work (SOW) 34. Vendor SLAs or KPIs 35. Customer Exclusivity 36. Late Delivery Penalty- Delivery Commitment 37. Inventory Commitment 38. Extended Warranty with specific warranty conditions 39. Local Content 40. Quality Certificates

Processes41. Specs Analysis Check for Biasness and Neutralization 42. Sample Testing Process 43. Equipment Monitoring - Life cycle Measurements for Warrant Conditions and Analysis 44. Standard Procurement Guide (used and updated regularly) 45. Standard Templates utilized across company 46. Procurement Policy and Exception Handling 47. Dispute Resolution Process 48. Transparency and Visibility 49. Web based or Automated Procurement system and processes Invoices, Budget Management, Payment Log Searchable, Reporting, Monitoring 50. Project Closure Analysis, Procurement Best Practices, Lessons Learnt 51. Continuous improvement process Lessons Learned and Best Practices implementation

Personnel and Intra Department Collaboration 52. Specialized Personnel Analytics, Research, Category Specialist, Business Unit Procurement Managers 53. Rotation Procurement and Business Users 54. Project Management and Procurement Linked Project Closure Analysis 55. Design Cost Savings Collaboration between Procurement and Business Units 56. Procurement

KPIs aligned with Business Unit KPIs

Setting up the Procurement department

The main goal leads to sub goals: Saving cost Support all departments with procurement know-how Increasing transparency Providing an overview of external spend Early information to the finance department (cash planning) High quality of contracts Reliable and auditable processes

To achieve these goals the Procurement department is in the role of a service provider and a challenger Service provider for each requesting department and the overall enterprise Support with procurement know-how Increasing transparency Early information for cash planning Reliable and auditable process Challenger of the requesting department Challenge specification Challenge potential supplier list Challenge evaluation matrix Challenge contract implementation

and will support each requesting department and the overall enterprise with different tools and services Procurement teams Consist of requesting and procurement department employees Close cooperation and common targets Decisions in consensus Team leader from procurement Processes Source to contract Purchase to pay Supplier management Mandatory rules, regulations and forms Procurement Guidelines signed by the CEO Procurement request Checklist for contract Negative list

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Table of contents

 Lufthansa Cargo and Jade Cargo Initial situation at Jade Cargo Setting up the Procurement department

Some important rules and regulations for Procurement in the airline industry
1615

Using the Source to Contract process contracts are concluded in a close cooperation between all related stakeholders of Jade Cargo
Contract signature process
According to Governance

Contract in place
Requesting department

RfQ, negotiation, proposal of awarding

Procurement Team

Approval gate awarding

Heads of requesting dept. and Procurement

Define RfQ and potential suppliers

Procurement Team

Approval gate RfQ

Heads of requesting dept. and Procurement

Define

specification
rocurement

Team

Approval gate specification

Heads of requesting dept. and Procurement

Procurement request
Requesting department

Budget check
Controlling

By Henry Canaday Airline Procurement, June 2008, p.20 The IT revolution, which swept through ticketing and distribution in a decade, is making steady progress on a much tougher challenge: Tying together maintenance planners, techs and their suppliers. Air Canada Maintenance will replace 12 legacy maintenance systems with six modules of Mxi software by early 2010, according to ACM Project Director Steve Bogie. The carrier chose Mxi for several reasons: Solving current challenges while preparing for a more automated future and because Webbased Mxi can be deployed to Air Canada stations around the world. "The core benefits are consolidation of systems and planning with a single view of the entire fleet," Bogie says. ACM has planned by tail number. Mxi will track components and subcomponents. "It is much more granular," he adds. "There should be less wasted time and effort in planning, and greater predictability should lead to labor savings." He expects IT savings from decommissioning legacy systems. Outsourcing will be more efficient as large books of job cards are replaced by accurate, digitized instructions to shops. Mxi's supply chain module sends electronic messages compliant with ATA Spec 2000 and 2200 and interfaces with most ACM suppliers. THE MORE THE MERRIER Mxi now has 27 customers including Air France, KLM, Lan Chile, Hawaiian Airlines, Qantas Airways and five other airlines. "We have doubled revenue in two years," President Lee Hines says. "There has been a general movement away from legacy systems, especially by large airlines." Mxi was built from the ground up centered on aviation components. "You can track down to nuts and bolts if you want to," Hines explains. He believes the application suits aviation better than enterprise resource planning systems, although chief information officers seem more comfortable with major ERP providers.

Mxi works with large multitype fleets, enabling fewer planners to handle more planes. Faster planning, esignatures and wireless communication reduce turn times, keeping aircraft in revenue service. Better tracking keeps parts on aircraft longer. And automation aids compliance, as both regulators and potential purchasers can search databases easily for maintenance records. The program was built with outsourcing heavy checks and engine overhauls in mind. It is accessible with most Web browsers and can exchange information in XML format with other systems. But it does not order parts. Instead it transmits part requirements to the carrier's ERP such as SAP, Oracle or Peoplesoft. PROFICIENT AND PRECISE Korean Air recently selected Oracle Complex MRO and Enigma to automate maintenance of airframes, engines and components across its fleet of Airbus and Boeing aircraft. Oracle CMRO does maintenance planning, configuration, engineering and execution while integrating "upward" with other Oracle applications for procurement, human resources, contracting and project management. CMRO integrates "downward" with Enigma to publish job cards for techs and reconcile maintenance documents. Currently about 15 customers use or are implementing CMRO. HannesSandmeier, VPdevelopment, says it was built for aviation, not adapted from Oracle's Enterprise Asset Management applications. Yet it integrates with Oracle's suite of leading ebusiness and supply chain applications without the extra work required by independent systems. CMRO only must be adapted to specialized airline systems such as flight operations. Part demand is generated by CMRO and transmitted by a demand management module to Oracle tools for internal inventory optimization or external supplychain management, procurement and tracking. Twentyyearold legacy applications simply cannot integrate as well with external platforms of shops or part suppliers. When CMRO is integrated with other Oracle applications, upgrading challenges are minor. Oracle releases upgrades of CMRO on the same schedule as other applications. Oracle hosts CMRO for a significant Latin American carrier, but its other systems are installed on airline servers. Although most users are large carriers, there are a few small customers. Sandmeier is seeing a lot of interest in the last six months, especially in the Asia/Pacific. He believes the Korean decision will prompt other airlines to go forward.

IT solutions get brighter and bolder every day. Technology that streamlines purchasing, maintenance and supply chain logistics can lead to big savings.
June 2008

Airline Procurement
SUBSTANTIAL GAINS Planning speed is impressive with CMRO. A military customer that once required two engineers three weeks to prepare paperwork for a heavy airframe check now completes this task in 7 min. with one engineer. "This reduces turn times, which are greatly improved for all our customers," Sandmeier says. Another benefit is better control over configuration. Legacy applications tend to be "siloed," with data stored separately for airframes and

engines at both line and base. "The configuration data has not been very complete, to say the least," he notes. One customer installed CMRO in just seven months, but implementation usually takes much longer for cleaning and converting data, changing business processes and training users. CMRO transmits to Enigma the maintenance tasks to be performed, which skills are needed and when. Then Enigma generates work plans for specific aircraft, explains Marketing & Business Development VP John Snow. "We generate the job cards for exactly what the 777 techs will be working on." Here again the advantages are speed, productivity and accuracy. Automation reduces manual activity and ensures job cards are consistent. Enigma generates correct job cards, paper or electronic, for both inhouse and outsourced maintenance. Mistakes are avoided and inspectors cannot approve work unless all steps are complete and signed off. Manually generating job cards can take weeks, during which time new Service Bulletins may be issued. Enigma automatically integrates the right SBs for each tail number and can produce a 1,200page job card in less than 20 sec. The application digitizes all important shop documents and connects them through hyperlinks in one integrated system. "There is no punching it in or copying and pasting it on the PC," Snow emphasizes. For parts, Enigma provides an Illustrated Parts Catalog for each tail number, ensuring configuration and SBs for individual jets are correct. Techs see only part numbers that apply to a particular aircraft. "This ensures the right part is ordered, reducing misorders, without manual work for checking SBs that do not apply," he says. Snow estimates that Enigma saves 5%10% of IT costs apart from all other savings. One airline reports that the program eliminated 80% of manual work required to produce job cards. It is used by nine airlines and three maintenance shops. Implementation usually takes about four months. MOVING ANCILLARIES IT also is being used to streamline and widen the connection between airline passengers and the nonflight products they buy, thus earning airlines significant ancillary revenue. The first selling opportunity is on airline websites. Airsavings procures ancillary products and integrates their sale on carrier websites. This relieves airlines of noncore functions and exploits the combined buying power of several carriers. The selling tool, Airplus, is embedded in the website so potential buyers are not bumped to, and lost at, another site. In 2007 Airsavings earned 6 million ($9.3 million) in profit for eight carriers including SkyEurope, Spanair, Air Europa and Smartwings. Ancillaries sold included insurance, airport lounges, carbon offsets and hotels. The company is launching Privilege to sell famousbrand merchandise from firms such as Armani, Adidas and RayBan at discounts of 40% 70%. Airsavings arranges for procurement and pays airlines commissions on sales. Two carriers already have signed up. CEO Ralph Bejar calls Privilege an "Internet hub" for highvalue merchandise seamlessly linked to airline websites. It also allows carriers to offer passengers with unredeemed mileage an opportunity to spend points, relieving the airline of mileage liabilities. Passengers remain potential customers after boarding. Guestlogix is deploying its pointofsale devices on Delta Air Lines' fleet and will

also put them on Ryanair jets. American Airlines, Alaska Airlines and Germanwings already use GuestLogix. CEO Tom Douramakos estimates it will be available to 600 million passengers each year, nearly a fifth of global traffic. Guestlogix devices accept cash, credit cards, gift cards and loyalty cards. The company's software tracks and analyzes orders to ensure enough goods are available on each flight. Guestlogix offers products not carried onboard as well; passengers will be able to order from the SkyMall catalogs common on North American flights. The company begins selling rail tickets to Gatwick Express on Zoom flights in June, with POS devices printing barcoded tickets so passengers can avoid ticket lines on the ground. Douramakos sees potential in Asia for selling receipts for dutyfree alcohol onboard with the actual product picked up at exit shops on the ground. The airline earns its cut of sales without stocking or carrying the goods. Theater tickets and restaurant meals are also possibilities. He believes it is possible to sell an average of $10 per passenger onboard, with 30%50% of revenue going to airlines. http://www.atwonline.com/channels/airlineprocurement/article.html?articleID=2375