Category Management: Missing Out on Travel Cost Savings

- December 7, 2012 8:12 AM
Categories: Category Management, Travel |

Far too many procurement organizations fail to integrate travel procurement with overall sourcing and supply management efforts. Yet travel represents a fascinating category and overall cost management opportunity. In many industries (software, IT, consulting, financial services, etc.), travel can comprise a substantial portion of addressable spend overall. In other firms, it typically makes up a sizable portion of indirect spend.

Attempting to manage this spend can be a chore. On the face of it, travel procurement would seem relatively easy. You start by establishing rules around who gets to stay at what kind of hotel, fly which level of service, rent or lease which kind of car, spend how much per meal, etc.

However, especially in global organizations, what works in one region or country can be hopelessly inadequate in another, to the point of making it hard to attract and keep talent. Consider how German sales staffs crave good cars – a basic Chevy just won’t do!

Making matters worse, the heavy T&E (travel and entertainment) users are typically high-powered executives, top-performing salespeople, or mission-critical engineers or consultants that are sent out with little advance notice. Sticking them the back of Ryan Air or Spirit Airlines where the seat pitch is not enough to open a standard notebook let alone catch a few winks is not going to cut it.

So even if you have policies in place, they can hinder operations if they result in wasteful and inconvenient travel schedules or lost productivity. Worse, a lack of compliance can then leads to travel spend execution mutiny when those who either are too important to disturb chose to ignore the rules (and get away with it) or assume they can rightly opt for their own travel path (and get offended when they get punished for what others get away with). The results, in either case, are a mess.

It is understandable that many firms have chosen to “cut out” this category or significant parts of it and shift large elements of strategy, compliance and tactical execution to an external service provider such as a Carlson Wagonlit or Orbitz. Yet is travel BPO the only answer? Of course this question raises others, which are critical to arriving at the right strategy to start.

For example, does this mean that T&E can’t be managed internally? Are procurement organizations incapable of finding an approach that is flexible enough to accommodate business needs, yet stringent enough to control costs and prevent fraud?

We will shine light into this topic in an upcoming series tackling all elements of travel procurement from cost to risk management. If you’re interested in helping shape our research, please get in touch. We’d like to hear from you about what you see working – and what does not. Drop a line: tkase (at) azulpartners (dot) com.

- Thomas Kase

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