Strategic Sourcing Meets the Hermès and Charvet Set: A Corporate Travel Vote Against US Airlines

- January 31, 2014 10:31 AM
Categories: Friday Rant, Spend Management, Total Cost Management, Travel | Tags: ,

Back in 2013, I met with a senior procurement executive for a global financial services firm after we had both had a couple of drinks. I always find talking to procurement heads in this industry to be a fun endeavor (especially on the investment banking side – since they must represent spend requisitioned by the biggest prima donnas in the business world with their own set of John Lobb, Andersen and Sheppard, Hermes and Turnbull & Asser preferences). And all the better once they’re sufficiently lubricated to result in more great war stories.

That discussion with this CPO touched on many areas, but I distinctively remember the exceptional deal the firm had negotiated on business class travel for dozens of city pairs on a long haul basis. The spend aggregation and forecasting the procurement team had done in prepping materials for suppliers to quote with the most data in hand had more than paid off in a price that was off the charts reasonable (at least based on some other informal benchmarking I had done).

The company ended up selecting a large US airline (which will go unnamed). Program implemented. Savings booked. Management happy.

But the story does not end there. It turns out one thing this firm had done was convince its own team members that the airline would be of a sufficient quality (upgrading fleets to flat beds, on-time performance improvements, etc.) vs. the European airlines (historically preferred by many folks). After all, a bunch of bankers flying across the world need to arrive refreshed. Or at least that’s what those in the Charvet tie trenches have convinced firm management of, based on my own experience with friends who have given their lives to the profession.

Flash forward about a year, when I met another head of procurement for another big bank. Again, we both had a couple of drinks in us, and I popped the question about their largest categories and best war stories. Travel (besides IT and professional services) was among the largest. I relayed the general elements of the story from my previous encounter with the other bank CPO without naming the airline that won the business or the firm in question.

Without missing a beat, the head of procurement named the airline that won the business and, without knowing the exact firm or the situation, proceeded to say, “Of course they would bid low – I could never convince our company to fly long haul on that airline at any cost.”

When it comes to sensitive topics like travel in a global services firm with thousands of key employees working 80 hour+ weeks, procurement leadership is as much about change management as it is developing and implementing the right savings implementation and measurement strategies. Yet in some cases, it’s also about knowing how far to push – and also when getting rid of British Airways, Singapore Airlines, and other preferred carriers of those in the trenches is not worth the resulting toxic storm that will result.

Granted, there are a million and one travel strategies to save money and drive compliance (e.g., deep analytics, data-informed strategic sourcing, airline rebate programs, card rebates, employee incentives, self-service, mobile tools, deep T&E integration into booking systems). But in the end, if your employees aren’t happy – and you can’t change their minds – then the best of intentions, data crunching, and supplier negotiation won’t change a thing.

After all, British Air has got afternoon tea and sandwich and scone service like no other, particularly fine after a multi-course, 2 claret and 1 port lunch. Or so I hear …

Related Articles:

  • No related articles found

Comments

  • Tony Bailey:

    You have highlighted a key area of supplier selection during a strategic sourcing project. Never accept future planned enhancements as reason for award in the present. A supplier may have the best intentions of achieving increased services, but I have seen several instance of lower cash levels following award, which prevents those promised enhancements. No employee of the company experiencing unfulfilled services will see past the award decision. This creates a difficult barrier of internal adoption when similar opportunities exist with non-incumbent suppliers.

Join the Conversation

* Required fields  [email address will not be published]

*