BTN - Procurement Practices - May 19, 2008 - (Page 9)

Procurement Practices Perspective On Travel As A Commodity No Longer Bleak BY JAY BOEHMER ommodity used to be a dirty word to travel managers, invoking their worst suspicions of what procurement would do to the services they manage. Though tensions still exist at some companies that continue to integrate procurement practices into the management of travel, the fears of some buyers that procurement would persuade upper management that air, hotel and car rental services were to be procured in the same way as pencils and paper—strictly at the lowest price—in some cases have subsided. Instead of turning airlines into paper clips, buyers and management consultants said that blending procurement practices into travel at best-in-class companies has strengthened travel management by bringing in better data, more rigorous analysis, more defined processes and greater visibility into a unique indirect spend category. Instead of killing the service element, travel buyers, procurement specialists and consultants said procurement practices—when harmoniously employed along with travel expertise—can strengthen policy, codify service expectations and minimize costs. “It really has become much more of a collaborative initiative,” said Carol Ann Salcito, president of Norwalk, Conn.-based corporate travel consultancy Management Alternatives Inc. “The greatest thing is procurement has brought process to the forefront, and those processes, coupled with travel industry expertise, equal an excellent travel program.” Though Salcito said of some travel professionals, “I watch their skin just crawl when we use the word ‘commodity,’ ” she noted there remains a variety of opinions on whether travel can be considered one: “Many people still think of a commodity as a widget, then there are others who think of a commodity as an airline seat. They’re all over the board on commodity, in all honesty.” Despite the images the word still may conjure for professionals who C grew up on the travel side, most companies responding to Business Travel News’ Procurement Practices Survey said their companies do in fact view travel as a commodity. For those respondents who work at companies with more than $5 million in annual U.S.-booked air spend, nearly three-quarters employ the c-word when referring to travel services. Regardless of the label, many said this hasn’t turned the procuring of travel services into a lowest-commondenominator equation, as procurement professionals recognize the complexities of the spending category and value service elements in purchasing decisions. In other words, even to procurement professionals who insist on sprinkling the word “commodity” into conversations on travel, they recognize that whether it’s an airline seat, a hotel room or a rental car, it definitely isn’t a paper clip. “This isn’t paper or pens or office furniture, true commodities with which procurement has great experience and great skill sets around the sourcing and negotiation,” said Bostonbased Aberdeen Group vice president and group director for global supply management Andrew Bartolini, “but that doesn’t make them experts in travel.” As Bartolini suggested, most companies that have successfully integrated travel with procurement have done so by leaving a role for travel experts in the sourcing process while folding in tried-andtrue procurement techniques. “The challenge is that there still is this us-versus-them mentality, where procurement is viewed as being able to do one thing and one thing only, to find the lowest cost in any opportunity,” Bartolini said. “The reality is different.” Rental cars and hotel rooms are the two travel categories most viewed as commodities, with about 40 percent of survey respondents labeling them as such. Thirty-seven percent of respondents considered airline seats to be a commodity and 13 percent viewed chauffeured car services in that way. Though Pfizer vice president of worldwide procurement Tom Donatelli said air travel services aren’t as core to Pfizer’s business as, say, the company’s advertising relationships, he noted that BUSINESS TRAVEL NEWS www.BTNonline.com May 19, 2008 9 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