What Can Travel Negotiation Teach Us About Sourcing?

In some cases, the lessons we learn in certain spend categories can teach us approaches for tackling different areas as well. As one example of this, it's worth considering some of the negotiation and sourcing strategies in a recent article from Travel Procurement that suggests how "Corporations must reclaim negotiating control" by choosing what types of information that they want to share with suppliers (versus what suppliers request). In this regard, "Corporate procurement specialists and travel managers are forced to give the upper hand to some airlines by providing confidential data that allows the airlines to mine this (scrubbed) database to determine how much business -- and often at what price --your company is giving to their competition ... I doubt that any chief financial officer would tolerate that type of purchasing paradigm from any other vendor trying to sell goods and services. Imagine IBM refusing to quote a price for computers and mainframes unless you showed them how many Dell products you bought during the past year and asked you to specify by type of product."

In other cases, "forced compliance" that mandates employees chose preferred carriers, hotels, car rental companies, etc. can backfire. Consider how we should "we should look at the overall investment in a trip and also take advantage of technology that allows a business traveler to 'spot buy' the best price, because it's difficult to prove that a $200 decision on one ticket could in fact impact 2 percent to the bottom line of an entire corporate airline discount program." It all comes down to the fact that in the end, "If you let the suppliers dictate the rules of engagement and artificially stimulate demand -- as well as stifle competition -- then you really have yielded the decision making to the supplier."

Certainly, this is food for thought in categories outside of travel. MRO providers and any company -- especially distributors -- that offer value-added services from a vendor managed inventory or just-in-time perspective have access to data that they can certainly use to their advantage, either limiting your choices or building higher margins for their products and solutions overtime at your expense as your dependency increases. It reminds me of Grainger suggesting sourcing strategies to potential customers. Caveat Emptor, I suppose!

- Jason Busch

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