Online buying cuts travel group costs

TUI, the world's largest group of tour operators, says it is achieving purchasing cost savings of up to 40 per cent using electronic auction technology.

One of the company's first online auctions involved the purchase of uniforms and clothing for its staff.

And Chris Bullock, head of technology purchasing and eprocurement, says the bidding generated savings of between 25 and 40 per cent, which amounts to millions of euros.

The auction technology is being used as part of a wider programme to improve TUI's purchasing. At the beginning of last year, the company started looking at software that would allow it to standardise the processes across its European businesses and reduce the time taken in its buying cycle.

The company, whose UK brands include Lunn Poly, Thomson Holidays and Britannia Airways, has invested a 'seven figure sum' in Oracle's 11i Ebusiness Suite, including the supplier's iProcurement, Sourcing and iSupplier Portal software.

'We decided we needed some kind of eprocurement tool to monitor and analyse our purchasing data,' said Bullock.

'We introduced iProcurement to cover indirect goods, which is anything not related to the operations of the business. That is things like stationary, marketing, IT and telecoms.'

TUI is using the application to control its spending and to conduct online sourcing, and has already reduced its number of suppliers from 10,000 to 1,000.

Bullock says TUI is well on its way to generating a return on its investment, but declined to specify how much it is spending on the technology.

But he says that electronic auctions and online procurement are only appropriate for certain areas of TUI's business.

About 15 per cent of expenditure is handled electronically, but other costs, such as aeroplane maintenance, are not suitable for online auctions.

'I don't think we'll get to a stage where we would run everything through electronic auctions,' said Bullock. 'We have certain suppliers that are monopoly suppliers, and some that we have very good relationships with.'

TUI used to be known as Preussag, but changed its name last year following a series of high-profile purchases including Thomson.