Intensive, far-reaching sourcing campaign saves a major commercial airline $90 million over 4 years

Situation:

With the industry in turmoil and sky rocketing fuel costs, the Supply Chain Management department of a major commercial airline knew aggressively lowering costs was essential. The company had aggressive savings goals; however the current Supply Chain organization was already fully allocated to prior year sourcing programs just as important to the company's future. To increase their team's capacity without adding additional resources, the company partnered with ICG Commerce to execute a broad, on-going sourcing program.

Solution:

Drawing on their extensive sourcing, eSourcing and category expertise, ICG Commerce helped the company to quickly evaluate the highest value opportunities as well as those that could be rapidly implemented to create the maximum cost reductions in the shortest time. The sourcing program has been in place over the last four years and has addressed a wide range of category opportunities and cost reduction strategies.

• Achieved 43% savings on specialty security services in a market controlled by two vendors by focusing on increasing quality while reducing costs
• Drove savings of over 30% on aircraft maintenance outsourcing initiatives
• Used online auctions and objective procurement involvement to drive 23% in IT temporary labor
• Saved additional 30% with a recently hired ad agency through should cost modeling
• Restructured various software contracts to align licensees with most appropriate version to drive 40% savings
• Developed a new maintenance parts supplier to create a competitive threat saving 15% in a market previously seeing 3 – 4% annual increases
• Created beverage co-marketing alliance to offset product costs with revenue resulting in a net savings of 52%

Results:

The company has reduced costs on average by 18% over the last four years. While acting as an extension of the company's Supply Chain team, sourcing efforts led by ICG Commerce have saved the airline in excess of $90M over the last four years. Working together ICG Commerce and the company have also laid the foundation for a strong and effective sourcing organization by developing category strategies, contributing to supplier management programs, and assisting with Supply Chain organizational design. Additionally, ICG Commerce developed and implemented a centralized Supply Chain organization for the company's regional airline subsidiary.