$8 Billion Commercial Airline: Airline trims in-flight refreshment costs through ICG Commerce sourcing services

Situation:

With mounting pressure to reduce operating costs without cutting levels of in-flight service, a major commercial airline sought to reduce expenses for bottled water and juices at least 5%. The airline was purchasing approximately 10.5 million units annually from a single supplier, with delivery to 5 different locations at a cost of $7 million. Sourcing efforts were complicated by uncertainty of future demand requirements and scarcity of suppliers who were willing to work with the airline industry.

Solution:

ICG Commerce combined deep category expertise and leading e-sourcing tools to help facilitate the bottled water and juice sourcing process for the airline. Sourcing professionals from ICG Commerce conducted an extensive market analysis, interviewed key stakeholders, and issued an RFP to 21 new suppliers as well as the current supplier. Product samples were requested and qualified through taste evaluation and marketing approval, and specification changes were also identified. ICG Commerce experts then developed strategies for two online reverse auctions, one for bids on bottled water and one for juice.

Results:

From the start of market analysis to the close of the auctions, the sourcing process was efficiently completed in 7 weeks. The two online reverse auctions, each between 1-2 hours in length, produced over 14% savings on water and juice items for the airline.