How Lufthansa is using data to reduce costs and improve spend and carbon transparency

 

On this page: Opportunity | Solution | Impact

The Opportunity

Creating a single view of spend data

Lufthansa Group is one of the largest airline groups in the world. It oversees a vast network of passenger airlines and aviation service companies.

Up until 2022, Lufthansa housed its data across 14 separate ERP applications. This meant that their spend management solution was able to provide an overview at a high level. The company recognized that if they could gain more transparency across these data sources, they would be able to identify actionable spend insights at more granular levels across the organization.

Cargo carts on the airport field, loaded and unloaded before the flight
Cargo carts on the airport field, loaded and unloaded before the flight

Lufthansa wanted to track more accurately what they were sourcing and paying for; this would open a channel to strengthen their procurement strategies, help identify more savings, and better understand their carbon footprint.

“Our data landscape is vast, complex, and distributed across systems,” says Holger Koenig, enterprise architect for Deutsche Lufthansa AG. “We wanted to break down data silos, simplify the delivery of trusted data faster across all our systems, and provide a single harmonized point of access to all our data sources.”

In 2022, leaders began working with McKinsey on a SaaS solution. It would need to play well with their own implementation of SAP’s Business Technology Platform (BTP) and translate siloed data streams into a consolidated, global view of procurement spend. It was called Spendscape.

The Solution

A fully integrated SaaS software

Spendscape provides a comprehensive understanding of procurement spending. McKinsey adapted it to integrate with SAP’s BTP to enable data and analytics-driven management and create holistic visibility across the supply chain.

Our data landscape is vast, complex, and distributed across systems. We wanted to break down data silos... and provide a single harmonized point of access to all our data sources.

Holger Koenig
Lufthansa Group enterprise architect

“Sophisticated organizations require superior data and insights for decision making. Procurement has gotten significantly more complex with carbon emission targets, managing supply risk, and inflation and deflation factors coming into play,” says McKinsey partner Björn-Uwe Mercker. “We now have a lot of volatility in the market, which drives the need for a super-fast reaction time. To do this, you need a data model and analytics that can keep up.”

Fully integrating the Spendscape SaaS software onto SAP’s platform would create a 360-degree view of Lufthansa’s procurement performance. First implemented at Lufthansa Technik, a business focused on maintenance and repair of aircraft, and now being rolled out across the group, the tool is creating greater spend transparency across sourcing systems, simplifying data integration processes, and informing supplier negotiations to help reduce costs.

tablet displaying a chart
The Spendscape platform combines sustainability data with a company's CO2 reporting to help analyze and optimize its emission baseline.
tablet displaying a chart

For example, future purchasing decisions could be made using not just a full picture of external costs and spending across the value chain but also with the added layers of near-real-time data on price volatility and carbon emissions -- leading to smarter decision making and procurement across the board.

Once fully realized across the group, the successful implementation of this tool could have far-reaching implications. It will provide better metrics across operations, including risk analytics, supplier negotiation, working capital, monitoring of material cost and procurement performance, among other areas.

“With Spendscape, we aspire to build one comprehensive spend analytics platform for Lufthansa, fully embedding it into our IT architecture strategy,” says Lennart May, senior director procurement, Lufthansa Group. “This will deliver actionable insights and be integrated with future systems.”

This reduces the number of tech components they need to use on the backend and allows for a solution that’s fast and scalable for future systems.

Björn-Uwe Mercker
McKinsey partner

The Impact

Optimizing cost and carbon reduction decisions

Spendscape has already uncovered actionable spend insights for Lufthansa Technik, where it was first deployed. It has also made it easier to collaborate across business units and provided a tool for data model changes and near-real time cash position management.

The impact goes beyond financial and operational improvements. With the EU’s Corporate Sustainability Reporting Directive taking effect at the start of 2024, Lufthansa also needs to strengthen and prioritize capabilities and transparency around upstream Scope 3 emissions reporting.

Spendscape unites procurement data from more than ten ERP systems into a single taxonomy. The result is a searchable source of truth combining information on carbon footprint across categories, down to the consumption and invoice level.

This made it possible for Lufthansa to create comprehensive Scope 3 emissions transparency and collaborate more effectively with suppliers to improve reporting accuracy and optimize decisions for both carbon reduction and cost savings.

“This is one of the more sophisticated use cases that goes well beyond classic spend reporting,” says Björn. “Spendscape’s ability to create more transparency around Scope 3 emissions shows just how powerful a sophisticated data landscape can be in transforming the way businesses are run.”

Our people

Björn-Uwe Mercker
Björn-Uwe Mercker