BTN - Procurement Practices - May 19, 2008 - (Page 6)

Procurement Practices Making The Most Of Business BY DAVID MEYER he true measure of a successful travel management program is its ability to properly support each business mission at the lowest appropriate cost. The mission of a strategic sourcing initiative is to establish quantitative assessments to both derive greater value and drive lower costs for a commodity. Combined, they can institute meaningful travel process improvements. Both start by determining how to measure quality as well as understanding the true nature of costs. Proponents often laud procurement practices for the discipline they can bring to bear in assessing relationships with suppliers that sometimes are based on personal connections. While such relationships can yield additional service for corporate customers, they also can result in higher costs. Even in the best of times, CEOs and CFOs often see the mostly dispassionate procurement practices as a more professional approach to supplier management. In the face of hard times, however, there is even more of a need for a methodical operating procedure. Rather than desperate measures, managing travel procurement in such an environment requires the deployment of deliberate and discrete metrics. As cost pressures continue to mount, a growing number of companies are applying certain sourcing techniques to travel management practices and see- T ing positive results. The trend certainly has not been slowed by concerns about an uncertain economy that clearly places us in the cost-control portion of the business cycle. What’s more, the periodic aggregation, quantification and summarization of performance and cost information that are hallmarks of procurement processes are presented in a language that senior manage- travel managers, other techniques, such as the use of key performance indicators, balanced scorecards and demand management practices, appear to be on the rise. Procurement, purchasing and sourcing organizations certainly have been behind the adoption of these practices at many companies, but it is notable that they also are being deployed at companies in ment understands. More than merely a numbers game, the goal is a qualitative one: to provide intelligence about existing and potential travel supplier services and costs that contribute to more informed and timely decisions. While some classic procurement techniques, such as issuing requests for proposals, mandating use of preferred suppliers and even establishing servicelevel agreements, particularly with travel management companies, long have been standard operating procedure for many BUSINESS TRAVEL NEWS which no such organizations are in existence. That’s clearly because travel managers have become more aware of the value of such metrics and have gained greater access to tools, such as dashboard products and broad travel purchasing platforms, that facilitate their use. At most companies that employ procurement professionals, travel managers usually work for or with them, particularly during the selection and evaluation of suppliers. In several companies that are among the largest buy- ers of travel services, procurement managers recently have replaced business travel managers. In most cases, however, procurement managers respect the subject matter expertise that travel managers possess and seek to incorporate that knowledge into the process. This study examines how and how much such practices are being applied to travel. It provides an understanding of the expectations travel and procurement practitioners have about travel and travel spending in the near term as well as their outlook on the relative importance of controlling costs versus ensuring a suitable level of service. It indicates that the stigma once ascribed to the word “commodity”no longer threatens travel managers because they have learned that a focus on service is so basic to the concept of strategic sourcing. While building on the baseline of original research that we conducted last year, this year’s study is an attempt to drill down even further to understand the use of specific contractual agreements that establish service levels and measurements of current and prospective travel supplier performance and traveler behavior. About half of respondents said they use financial incentives or penalties in their service-level agreements, which they mainly have in their travel management company contracts. Many companies are adopting key performance indicators for online booking adoption and 6 May 19, 2008 www.BTNonline.com 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