2005 Supply & Demand Chain 100 Case Study  Delta Airlines / Verticalnet

Profiles in Supply Chain Enablement: Airline elevates supply chain management as a discipline and leverages e-sourcing tools to save half-a-billion dollars

Profiles in Supply Chain Enablement: Airline elevates supply chain management as a discipline and leverages e-sourcing tools to save half-a-billion dollars

Company: Delta Airlines (Atlanta, GA)
Company Size: Large
Company Sector: Transportation
Area(s) of Enablement: Sourcing, Procurement
Enabler: Verticalnet (Malvern, PA)

SDCE 100 2005Case Study: In the healthy economy of 2000, Delta Air Lines' supply chain management (SCM) organization set an aggressive goal of $300 million in cost savings by the end of 2004. The company's SCM group came up with a strategy that focused on culture, people, processes, tools and knowledge to cut its $9 billion in annual spend. A cornerstone in this strategy was developing and institutionalizing a strategic sourcing process which would serve as the basis for sourcing all goods and services.

However, Delta and the airline industry as a whole faced several challenges over the upcoming years as the economy slowed, 9/11 terrorist attacks nearly halted passenger travel and low-cost airlines stepped up competition. These events underscored the need to accelerate the organization's progress towards a world-class supply chain organization and, when coupled with other corporate initiatives, became a key component of the company's long term strategy for survival and profitability.

A key element to Delta's success was elevating supply chain management as a discipline, primarily through the creation of a sourcing council led by several C-level and other top executives. Once the company was prepared as an organization to take on such a task, it was time to bring in experts with the right tools and knowledge to get the job done. Following exhaustive testing of the various solutions available, Verticalnet was chosen based on its broad sourcing process capabilities and its focus on providing functionality, templates and coaching to foster knowledge and skills enhancement.

Verticalnet brought Delta Web based, on-demand e-sourcing solutions, making the institutionalization of global sourcing management possible along with a focus on achieving maximum savings and sustaining sourcing performance.

Delta deployed its e-sourcing initiative in the summer of 2001 with a series of pilot projects and a reverse auction for IT contract services that yielded over 15 percent savings on a $16 million spend for the end users. This early success served to solidify the role of e-sourcing as standard operating procedure among Delta's SCM group and executives.

Verticalnet worked closely with Delta on a number of subsequent e-sourcing projects, while updating on a regular basis the user interface and building custom functionality for several specific projects at the company. Enabled by the Verticalnet solution, Delta supply chain professionals were able to research and profile categories, collaborate with stakeholders, develop total cost and negotiation strategies, execute negotiations, award contracts and manage supplier performance, all through a secure Web browser, ultimately resulting in savings far greater than expected.

By the end of the 2004, Delta saved more than $500 million using the strategic sourcing process enabled by Verticalnet's solution, which enabled Delta to enforce a standard sourcing process globally and to maintain process and supply market knowledge.

Delta's continued focus on exploring the benefits of outsourcing introduces new levels of complexity and coordination to both the sourcing and supplier management dimensions. The Verticalnet tools deployed at Delta help streamline these efforts by providing a stable, consistent platform for conducting these events, which promotes easier coordination between internal and external stakeholders, easier measurement and reporting of our progress while helping to drive the performance of both our internal and external constituents (both before and after the sourcing decision has been made).

For more stories of successful supply chain implementations, read the "2005 Supply & Demand Chain Executive 100" article in the June/July 2005 issue of the magazine. Also watch the Today's Headlines section of SDCExec.com every Tuesday and Thursday for more in depth best practices drawn from this year's Supply & Demand Chain Executive 100.