BTN - Procurement Practices - May 19, 2008 - (Page 12)

Procurement Practices Buyers Seeking More Precise, BY SETH HARRIS hile an increasing amount of procurement-oriented travel buyers are using service-level agreements in some of their supplier contracts, some buyers, as corporations increase scrutiny of T&E spending in the current economic environment, are reevaluating their SLAs to make them more stringent and including risk-reward criteria in the form of financial incentives for exceeding goals and penalties for shortfalls. In fact, about half of those who responded to Business Travel News' survey include financial incentives or penalties as part of their agreements. Meanwhile, procurement’s increasing influence over corporate travel management has brought forth further metric-based analysis for management and buying decisions, especially for air, car and hotel, where easily measured key performance indicators primarily focus on such price analysis as average cost per mile, average ticket price and average hotel room rate. However, measuring travel management company KPIs has proved more difficult, as they are more ambiguous, subjective and at times dependent on a firm’s business practices and service needs. While many agency SLAs don’t carry financial incentives or penalties, they still are used because they set the framework for how the agency and corporation should perform during the contract term. “It’s a guideline of how one operates a business together,” said Ovation Travel Group executive vice president Michael Steiner. “It’s a great tool to be able to sit down quarterly and review specifically how we are doing. It’s good for the client and good for the service provider as well because it keeps everybody focused on that blueprint.” BAE Systems, which manages travel through its procurement organization, has SLAs in place for some travel suppliers but doesn’t put much stock in them for its travel management com- W pany relationship, as changing business needs and patterns often render SLAs obsolete. “The SLAs just serve the purpose of being able to point a finger and that’s not what it’s about,” said BAE Systems manager of travel administration Melissa Grimes. “Through partnership, we can achieve the goals without referring to arbitrary numbers. It has to be a win-win for both. American Express is given SLA standards in the marketplace, but what if the company is not a good partner and doesn’t allow them to hire the staff needed to meet the SLA? You have to be in a place where you can help them be successful.” Buyers who do use agency SLAs often focus measurements on offline agent service metrics, which are seen by many as the bellwether of agency customer service. “It’s the leading indicator and the canary-in-the-coal-mine sort of thing,” said Tom Wilkinson, president of Pennington, N.J.-based TRW Travel Consulting. “If telephone stats are bad, the rest of the service is probably suffering.” Although Corporate Travel 100 company BAE Systems does not take a hard-and-fast approach to travel supplier SLAs, its procurement orientation brings with it a metric-oriented mindset. The company assesses its agency service levels by analyzing phone stats in concert with KPIs derived from internal traveler surveys administered by its agency, American Express Business Travel. As a part of the travel process, the surveys are issued to travelers 30 to 60 days after trip completion and results are reviewed with the supplier quarterly. “The client survey to me is the most important KPI that we have,” Grimes said. “In and of itself, looking at it doesn’t tell you much, but when you step it up and put it with our phone stats, that’s when the data becomes a lot more robust.” Midmarket travel spender National Semiconductor also manages travel through purchasing and applies similar agency measurement practices. Mark Vilcsek, senior purchasing manager of travel services, said he also gauges agency metrics service-level through internal traveler surveys, offline agent KPIs and general traveler feed- 12 May 19, 2008 www.BTNonline.com BUSINESS TRAVEL NEWS http://www.BTNonline.com

Table of Contents for the Digital Edition of BTN - Procurement Practices - May 19, 2008

BTN Procurement Practices - May 19, 2008
Contents
Letter From Our Sponsor
Making The Most Of Business Travel Metrics
Bringing Travel As A Commodity Into Perspective
Employing More Precise, Stringent SLAs, KPIs
Adopting Mandates, Scorecards, Demand Management
Roundtable: Procurement, Travel Converge

BTN - Procurement Practices - May 19, 2008