Travel Business CPR

Five Steps Toward Gaining Travel Purchasing Control

Most corporate travel managers today face a variety of important challenges as they seek to organize their company’s travel function. While most of these issues are important and/or highly visible to the other “stakeholders” in their company, the most critical objective for the corporate travel manager today is to take control of the travel purchasing process.

Step One:

Data Collection, Analysis and Feedback

As in most other business situations, there is a direct correlation between control and information availability. Inasmuch as the travel business, today, is an information business, the data collection process in central to any effort to increase control.

More specifically, there are three principal reasons to conduct a thorough analysis effort. First, you want to gain hard information on your company’s current purchasing efficiency. If you should decide to alter purchasing behavior, any recommendation must be accompanied with a comprehensive rationale and supported whenever possible with quantifiable information.

Secondly, collecting current travel data allows you to establish a “base-line” of information from which you can measure future performance. A well-conceived profile of travel data behavior will enable you to monitor specific vendor activity, travel behavior, as well as the progress of the overall program. However, a data base will provide few benefits if those performance areas to be tracked in successive years are not identified up front.

Lastly, the data collection and analysis process should contribute to the creation of the “big picture.” Accordingly, the conceptualization of the “big picture” becomes more important the larger and more complex your organization is. A solid understanding of divisional relationships and the implications of future configuration alternatives are key to developing the “big picture.”

Key Element—Collection Methodology

There are two principal methods of collecting corporate travel data: expense report sampling and surveys. Expense report sampling, while providing valuable information relating to the establishment of baseline information, can be a resource intensive process. Surveys, on the other hand, cannot provide detailed performance information but represent a more efficient collection method, especially in larger multi-location organizations. A well thought-out survey can provide you with enough data to analyze different configuration options if you do not wish to commit the resources associated with expense report sampling.

Once the company’s travel data has been collected, it must be arrayed and interpreted to answer several basic questions:

·       What is our travel volume and how does it break down by company location and by supplier?

·       How dispersed is our travel spending?

·       Does the level of service offered to our travelers vary significantly among company locations?

·       How does our performances to date compare with the opportunities available in the industry today?

The answer to these questions will provide the basis for developing a new service configuration. Again, the answers these questions should be quantified, whenever possible.

 

Step Two:

The Service Configuration

The service configuration is an outline of the major service elements for each of your company’s locations. Two major elements in a service configuration are the reservation and ticketing sites. Your objective in designing a service configuration is to maximize the services offered to your company’s travelers while minimizing overall travel expense.

Interestingly, your company’s competitive environment determines which parameters will be addressed in your configuration. For example, manufacturing organizations (due to foreign competition, etc.) are often more interested in minimizing travel expense dollars and, therefore, will prefer a configuration that may inconvenience the individual traveler in return for lower travel costs. Other organizations may put more emphasis on service, as they are able to pass their travel costs along to clients, or they are in highly service-oriented industries.

Additionally, your company’s corporate culture will contribute to the ultimate design of your service configuration. Those companies with highly centralized and influential corporate offices are much more likely to consolidate travel purchasing with a single vendor. Likewise, a decentralized company that encourages individuality must have a service configuration flexible enough to incorporate multiple vendors.

Key Element—Automation

Due to technological advances in travel automation and the increasing sophistication of travel agents, new and unique options are now available to corporations seeking to customize a service configuration to their needs. This combination of technological advances and agent sophistication is partially responsible for the large and often confusing variety of configuration alternatives found today.

The major benefit to corporations as a result of these advances is the capability to standardize travel services and conveniently collect travel management information.

While the prior planning stages were critical to the design of a controlled purchasing system, these next steps are just as important and may, in fact, be the key to your success.

 

Step Three:

RFP Development

Once company data has been collected, configuration options analyzed, and a final strategy decided, the next significant task is the development of a comprehensive and meaningful Request for Proposal (RFP). The RFP serves as the mechanism to transfer internal information gained in previous steps to the external environment. There are three key objectives to keep in mind in developing the RFP:

  1. Communicate your overall travel management objectives to the agency community. The RFP, for example, must define whether your priorities are service or cost-related. A clear delineation of priorities allows bidding agencies to determine whether or not they can/should make the effort to bid on the account.
  2. Provide enough information to bidding agencies. The RFP must contain information that will result in “informed proposals.” Bidding agencies should not be expected to guess your travel characteristics.
  3. Structure the RFP so that the resulting proposals will be easy to read and evaluate. Some agencies will overload you with extraneous information if left without format or content guidelines. Such a situation will only make a job of analyzing each bid more lengthy and complex.

Key Element—Organization

Organization or “being organized” is not an isolated element or characteristic of the RFP, rather it should be pervasive throughout the whole process. The RFP stage is much too crucial to implement haphazardly as the next two steps depend heavily on a well-architected document. Organization is the one key element in the this process that will insure an effective and meaningful result.

Being organized entails asking only what is necessary for evaluation purposes, providing to allow the agencies to bid competently and instituting order into the bid process. A systematic, well-organized development process increases the probability that you have asked all the appropriate questions in such a way as to assure responses which lend themselves to easy comparison.

 

Step Four:

Bid Analysis and Evaluation

The RFP has been distributed, individual questions answered and possibly a bidder’s conference has been held. Now there are a number of proposals sitting on your desk and you must decide which proposal “best fits” your company’s unique needs. The determination of such a “best fit” should include the following:

  1. An evaluation of the real capability of each agency – all agencies will promise the best service but do they have the supporting infrastructure to deliver on such a claim? Any analysis of agency proposals must search beyond the inevitable sales pitch.
  2. A focus which is consistent with those areas prioritized in your configuration design and RFP – there is little utility derived from determining which agency’s hotel program has the best rates when your company has better rates or is not cost-conscious. A good grasp of the big picture will allow you to determine the appropriate weighting to each category.
  3. A strategy involving a “first cut” of the proposals received and which allows for agency presentations – while a well-structured RFP facilitates comparative analysis, it provides little insight into the agencies’ personality. It is often very helpful to invite the top three or four candidates in to answer specific questions about their proposals.

Key Element – Quantification

One requisite characteristic of any competitive bid process is objective analysis. A key element in that stage is your ability to quantify or to make “apples to apples” comparisons. Qualitative analysis is important and plays a major role in evaluation but should not compromise the objectivity of the process.

Any quantification or scoring system must be sensitive to the company’s primary objectives as dictated by the service configuration as outlined in your RFP. If, for example, cost reduction is a corporate priority, then an agency’s relative strengths and/or weaknesses in that area ought to receive commensurate attention.

 

Step Five:

Contract Negotiation and Implementation

The last of the five steps, Contract Negotiation and Implementation, is crucial to “getting started off on the right foot.” The contract negotiation process should not be adversarial nor the time to introduce “surprises.” By this time both agency and corporation should be familiar with each other’s needs and expectations.

The contract, itself, represents an up-front agreement between the two principal parties in regard to service provisions and expectations. While the ultimate responsibility rests with the corporate travel manager, the contract should delegate accountability and define expectation in each of the following areas:

  1. Traveler Services – What services will the agency provide or broker on your behalf? What standards will be used as a measures of their achievement? What behavioral adjustments, if any, will be expected of the travelers?
  2. Cost Reduction – If cost reduction is a priority in your company, how will you measure the agency’s contribution? What types of incentives can be used to motivate this result?
  3. Information Management – What information will you require from the base of travel data accumulating in the agency’s computer system? Will reservation agents have to enter additional data to provide you with the information you need? How often and when will the information be provided?

Key Element – The Cutover

Unlike the previous steps, the cutover is a key event. As with any change in service configuration the potential for implementation problems and traveler discontent are great.

The cutover process is not something to take lightly. Too often an agency’s focus is directed toward “winning the bid” with little consideration given to what ought to be done once the award has been made.

Why is Controlling Travel Purchasing Important?

Today, most corporate travel manager’s face a multitude of tasks and challenges as they move to organize their departments. However, before such tasks as travel policy development and direct vendor negotiation can be addressed, the corporation must first take control of the purchasing process. The five steps outlined will enable you, the corporate travel manager, to control travel purchasing systematically.

Controlling travel purchasing is, perhaps, the key distribution-related element in a corporate travel management program. Successful completion of this process will increase the probability of success in other areas of travel management as well (due, for example, to more comprehensive travel data and the fact that control has been established). And effecting any real change in a travel management program will occur only with the systematic development of a solid foundation.

Tharwat Abouraya, CTIE
Travel Business CPR