With 2 000 employees and a further 20 000 persons working in or around the facility, Copenhagen Airport (CPH) is Scandinavia’s main airport. Per Madsen joined the company as CFO in 2008. Among other tasks, his

responsibilities include introducing an integrated

strategic sourcing process at CPH. “The organization had a traditional approach to procurement that was incapable of leveraging all the

potential benefits of strategic sourcing. We are now in the middle of a process change,” he explains. One of the steps in this transformation is the

way buying is done at the operational level. An e-purchasing system (internally known as Smart Buy) had been in place since 2005, but was re-launched in the beginning of 2009. The initiative has been successful so

far - CPH has gone from a very low amount of purchasing executed through the e-procurement system to more than 50 percent of spend under management in a couple of months. “In our experience, three things determine if people will adopt any such system: You have to find what you are looking for, it has to be easy to use and there has to be someone there to help you if you get stuck. Today we have two members of the strategic sourcing department who provide support for the system, and we also have worked hard to ensure that content is relevant to the end-user,” says CPO Mads Fischer-Rasmussen, who was recruited by Per Madsen to head the strategic sourcing department. This team’s function is to assure the right type of structure, agreements, quality, price levels, supplier compliance with CSR policies and other common practices.

Involving people

In order to involve users and stakeholders, user reference groups and a procurement committee now meet at regular intervals. Questionnaires are also sent out after each sourcing round. The feedback is that people appreciate being involved from the start. “But you must avoid raising

people’s expectations too high – no process or system can accommodate all preferences. So some suggested changes will be rejected, for instance if an improvement puts some functionality or necessary process step at risk.

But this is accepted as long as you explain your decisions,” Per Madsen points out. “It all goes back to how you set up the introduction and implementation of a new process. Just installing a system and telling people to use it won’t do the job.” In fact, the feedback loop that has been introduced as part of the sourcing process at CPH has been so successful

that a lot of creative proposals have to be put on hold. “After the initial push from above, we are now seeing a pull from within the organization. The value that our strategic sourcing process is generating really has stimulated

involvement. Therefore we have to prioritize projects, as our resources are limited,” Per Madsen explains. For Mads Fischer-Rasmussen, there’s no mystery about how to increase visibility of the procurement

function. “If you deliver, people notice. For example, my department worked with Real estate and Cleaning on a sourcing project for window cleaning services and we reduced costs by 28 percent. This kind of success

makes everyone else aware of the potential of a proper

sourcing process,” he says. Mads Fischer-Rasmussen also sends out a newsletter to all middle managers about sourcing initiatives and

how the sourcing department’s services can be leveraged by the rest of the organization.

Full integration

But changing the way procurement works is not only about changing processes, it’s also about changing minds. “From my perspective as a CFO, I see very clearly that we won’t achieve our long-time business goals if we

don’t integrate strategic sourcing in our operations,” Per Madsen says.

For instance, procurement savings are now factored into all the main operational budgets at CPH. This means that if a department doesn’t take action on reducing cost, it will have to save the corresponding amount in some other area or fail to deliver expected targets. “This is clear message to all operational managers, as this performance also affects their bonuses. In my opinion, cost reduction should be seen a self-evident part

of the job for every operational manager. But this insight is lacking in many companies because the potential value of procurement is not understood,” he continues. Another aspect of the integration process is how finance and purchasing communicate. “That’s also something where we now have a common ground. All definitions and measures are set up in collaboration,

so there is no debate on what, for instance, constitutes a bottom-line saving or how it should go in the books,” Per Madsen says. “We also work in close co-operation with the financial controllers at the start of every new sourcing process, so that they understand base-line costs, historical figures and

other commodity specific factors of which they might not be aware,” says Mads Fischer-Rasmussen.

Only a first step

For CPH, the strategic sourcing initiative doesn’t stop at implementing new processes and methods within the company. In order to deliver future optimal value, the company has to look to the outside. “The next step to fully leverage our position will involve common sourcing initiatives with immediate partners such as the many shops established on our premises. We are also trying to start a purchasing group with other European airports – but that’s some years away,” says Per Madsen. One of the advantages CPH has when it comes to cooperation and best practice sharing is that airports

are not generally competing with each other, Mads Fischer-Rasmussen points out. “Collaborative sourcing in certain selective areas certainly has a future. We already have an agreement with Newcastle Airport for co-sourcing of aircraft de-icing equipment, and are now looking for partners to source air bridges (the connecting ramps between airplane and terminal),” he says.

Another example is an enquiry from an airline operator to source uniforms in partnership with the airport. This would have made excellent sense, as more than half the 2 000 people employed by Copenhagen Airport wear some kind of uniform. Unfortunately, the airport had already started the sourcing process according to EU directives, and couldn’t start such a

partnership. “But it’s a good example of a potential future partnership. It’s easier for an airline to do this type of co-sourcing with an airport than to do it with another airline,” Mads Fischer-Rasmussen says.

Don’t squeeze, qualify!
As all airports, CPH has suffered from the downturn, with a 15 percent decrease of passenger volume during the first quarter compared to 2008. This has forced the company to downsize, but the new economic realities

don’t necessarily imply renegotiating supplier prices. According to Per Madsen, the reaction to the downturn from a procurement perspective depends on your spend structure and organizational maturity. “At present,

we stand to gain a lot from getting down the number of suppliers and getting the right type of contracts applied to all commodities. This gives us bigger savings in the long run than spending time and effort on renegotiating contracts to save a bit on price,” he points out.