10 things every travel manager should know about procurement€¦ · 10 things every travel manager...

LABTA Educational Session

10 Things Every Travel Manager Should Know About Procurement

Proxima Group March 2013

What will you get from this session?

© Proxima 2012. All rights reserved 2

How to harness the benefits of procurement to maximize your total travel program effectiveness

Practical leadership tips that will help elevate the results of travel procurement projects

How to be more innovative in your thinking around travel cost management

1. Know what “Good” procurement looks like?


I don’t have experience of that specific

service

Why don’t we hold off until

the contract is up for

renewal

Is that the lowest cost

bid?

We need to follow the company sourcing process

I’m running a bid at the

moment so won’t have

time to help

I’ll “google” the supplier

before we meet

It’s ok I am trained in

negotiation

2. Bring procurement in early and keep them involved throughout the contract period


Determine Need Sourcing Purchase &Receipt

SupplierRelationshipManagement

Capability

Typical sourcing process

Conventional procurement focus

Redefined procurement teams

Low

High

3. Successful sourcing projects include a team of people that all have an important role or function in the process


Agree on project details& kick-off

initiative Sign-off on approach

Sign-off on implementation plan

and savings realization

Evaluate performance & conclude project

What is the business case for the initiative?

• Propose project outcome/value and timeline

• Present findings, analysis, and strategy/approach for project execution

• Secure (BU) participation

• Propose implementation plan

• Present refined costs/ benefits

• Propose savings methodology

• Present implementation results / status

• Escalate unresolved compliance issues

Does the business case demonstrate value to continue the initiative?

• Identify roadblocks & propose mitigation Identify appropriate project stakeholders & facilitate communications

• Approve project for development

• Evaluate strategy & approve project for execution

• Facilitate / conduct communications to relevant stakeholders

• Evaluate & approve implementation plan

• Sign-off on savings realization methodology

• Facilitate/ conduct communications to relevant stakeholders

• Help define & execute mitigation plan for non-compliance issues

• Escalate unresolved issues to leadership

Do I support the initiative for the business?

• Informed of approved initiatives

• Informed of project status

• Communicate expectations for compliance to end-users

• Support non-compliance requests through communications & reinforcement

Category Team

Council

Leadership

Travel mngr. Category lead Sourcing mngr. Finance mgr. Regional buyers Traveler/Arranger

Procurement Lead Finance Director Travel Director

CFO VP Shared Services

4. It is important to differentiate between lowest price and lowest cost

© Proxima 2012. All rights reserved

6

Total Cost

of

Ownership

Travel

Hotel Cost

Agency Cost

Air Ticket Cost

• Emergency Travel Services

• Change Requests Support

Management Fees • Online Booking

• Agent Assisted Booking

• Client Negotiated Airfare

Transaction Fee

Rental Car Cost

Airfare Cost

Nightly Room Rate

Misc. Charges • Internet

• Parking

• Fitness Center

Misc. Charges

Fuel

Daily Rate

• Mileage Charge

• Vehicle Fees

• GPS

• Concession Fee Recovery

• Self fill

• Fuel and Service Charges

• Fuel Purchase Options

Price

Procurement

Process

Labor Costs • Time to register new online users

on Cliqbook

• Time to train new online users

• Air Ticket Cost

• Taxes

• Room Rate

• Taxes

• Daily Rate

• Taxes

Travel Policy

• Policy Enforcement

• Advance Booking

• Preferred Suppliers

• Upgrade Fees

• Energy Surcharge

Ancillary Fees • Baggage Fees, Early Check - in

• Change Fees, Preferred Seating

5. Procurement can be the catalyst build trust with the stakeholder community


Trust

Intimacy Credibility Reliability

=

X

X

“Understand

stakeholders’

challenges”

“Deep

expertise &

insights”

“Deliver what’s

agreed, and

on-time”

Self orientation

“Know that you care about

serving our interests”

6. Procurement practices have evolved – just like travel management has


Area Conventional Procurement

involved

Redefined Procurement

involved

Defining needs/team members

No Yes

Setting up decision criteria Yes Yes

Supplier analysis Yes Yes

Total cost evaluation Limited Yes

Cost Management & Audits No Yes

Compliance Reporting No Yes

Managing KPI’s/Reporting Limited Yes

7. With access to current thinking and market knowledge procurement can bring support for better decisions


Look to the ancillary fees and traveler behavior to find the proper balance of room night price vs. ancillary fees

Inputs Action

Compliance Reporting

Procurement has the POV to do a thorough evaluation of T&E spend to determine most cost effective policy

Supplier Commitments

Restructured Policy

Outputs

Artist Title Sales (#) Spend (£)

AdSales(£/#)

Inc. sales (#)

CPU (£/#)

TAKE THAT PROGRESS 1,825,458 463,064 0.29 254,301 1.82

WANTED THE WANTED 220,763 196,865 0.91 65,988 2.98

ELLIE GOULDING LIGHTS 153,480 110,504 0.72 50,023 2.21

BLACK EYED PEAS THE BEGINNING 259,403 224,801 0.90 74,803 3.01

CHERYL COLE MESSY LITTLE RAINDROPS 318,963 269,646 0.89 80,405 3.35

EMINEM RECOVERY 89,419 4,146 0.05 646 6.42

SATURDAYS HEADLINES 56,299 57,792 1.06 5,546 10.42

DUFFY ENDLESSLY 155,722 142,378 1.05 42,404 3.36

NELLY FURTADO THE BEST OF 22,129 2,637 0.14 2,046 1.29

Artist Title Sales (#) Spend (£)

AdSales(£/#)

Inc. sales (#)

CPU (£/#)

TAKE THAT PROGRESS 1,825,458 463,064 0.29 254,301 1.82

WANTED THE WANTED 220,763 196,865 0.91 65,988 2.98

ELLIE GOULDING LIGHTS 153,480 110,504 0.72 50,023 2.21

BLACK EYED PEAS THE BEGINNING 259,403 224,801 0.90 74,803 3.01

CHERYL COLE MESSY LITTLE RAINDROPS 318,963 269,646 0.89 80,405 3.35

EMINEM RECOVERY 89,419 4,146 0.05 646 6.42

SATURDAYS HEADLINES 56,299 57,792 1.06 5,546 10.42

DUFFY ENDLESSLY 155,722 142,378 1.05 42,404 3.36

NELLY FURTADO THE BEST OF 22,129 2,637 0.14 2,046 1.29

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Card Data

8. The negotiation strategy should be formalized


Be Ready - Never forget to prep the suppliers BEFORE you meet for negotiations

Design The Outcome - Review and set the roles and negotiation strategy

Educate the Suppliers -Tell them why they want your company as a preferred customer

9. Align category strategies with corporate travel priorities


Market driven

competitive bidding

Policy Compliance

Utilization of

Preferred Travel Agency

Optimize traveler

experience

Contribute to growth

of Company

Measures Of Success

Optimize travel spend by reducing Total Cost of Ownership (TCO)

• Reduce TCO •Increased competition and volume leverage • Utilization of preferred suppliers •Leverage & build key supplier relationships

Influence traveler decisions thru a) appropriate booking tool content and b) compliance

• Reduce TCO • Utilization of Travel Agency •Utilization of preferred suppliers •Policy Compliance • Improve key performance indicators

Utilizing appropriate procurement channels

•Travelers booking thru Travel Agency •Policy Compliance • Aligning process with business needs

Traveler communication and training

• Utilization of Travel Agency •Policy Compliance •Improve key performance indicators

Corporate Travel Priorities

Ca

teg

or

y S

tra

teg

ies

10. Harnessing procurement thought leadership can bring understanding to the category lifecycle

Example: Agency


Defining needs

Agency selection

Contracting

Buying Reviews Effectiveness measurement

Cost management &

audit

On-going benchmarking

A quick recap…have we shown you how to:


…by creating a procurement team that can build trusted relationships, not just be good at sourcing

Get a deeper and up-to-date understanding of the market…

…by using knowledgeable specialists who invest time in understanding the market on an on-going basis

Be more innovative in your thinking around cost management…

…by investing in experts who can deliver solutions that meet business needs, not just cost control

How to harness the benefits of procurement to maximize your total travel program cost

Q&A Thank you

10 things every travel manager should know about procurement€¦ · 10 things every travel manager...

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