02 October 2018by Guest Blog
Redesigning your travel purchasing strategy
Air TravelCategory Management & Business AlignmentCategory ManagerdevelopingFleetHotelsItleversMarket AnalysisMeetings and EventsRisksourcingStrategic Category ManagementtravelTravel management
While tools such as Skype for business help reduce the need for business travel, businesses still spend significant sums on this category. As such, category managers require a purchasing strategy that focuses on both compliance and savings.
Travel can be disrupted by all kinds of events, from natural disasters to a simple diary clash. Journeys can be disrupted at the last minute, which means travel strategies must also continuously evolve.
Category managers should consider the following considerations when developing their travel strategies:
- Travel behaviour: Most travellers have their own preferences when it comes to air carriers and hotel chains. These tend to be driven by loyalty schemes. It is important therefore to understand what these schemes are and how they can influence traveller behaviour through preferred supplier selection.
- Technology: Business travellers want to book their trips quickly and simply. As consumers, they are used to and comfortable with booking hotels and flights in a few clicks. The right technology solution will help buyers to ensure compliance and learn what employees book and when they book it. That information helps building category managers build a complete picture of the organisation’s expenditure in this area.
- Risk: Travellers are exposed to many different types of risk, so organisations must have a formal duty of care plan in place to protect travellers.
Category managers should use the following levers:
- Market analysis: The impact of factors like inflation and expected cost increases, market maturity will differ for each organisation according to where they are based and employees’ travel patterns. You need to make sure you know how these factors affect your requirements.
- Supplier analysis: The travel industry has seen a fair amount of market consolidation over the past few years. The presence or lack of competing suppliers will affect buyers’ negotiating power. In July 2018, for example, American Express Global Business Travel (GBT) acquired Hogg Robinson Group to form the world’s largest global TMC. GBT also acquired KDS, a leading software platform, which will further strengthen its position in online bookings;
- Supplier optimisation: Optimise and consolidate preferred suppliers for the most frequently travelled routes and cities to help buyers negotiate greater discounts.
- Volume consolidation: Look to consolidate volume to help optimise and improve return on investment for lower-volume routes. Rather than negotiating separately for each hotel, look to negotiate ‘blanket’ discounts or dynamic pricing;
- Focus on ancillaries: Include upgrades and lounge access in negotiations to generate savings and encourage employees to comply with the organistion’s travel policy.
- Nontraditional savings: Some organisations have been able to negotiate with airlines to allow unused airline tickets to be transferred to another employee free of charge, which can save both time and money.
Using the above as guidelines will allow you to design a travel policy that will positively impact indirect spend while mitigating supplier risk and create a more positive experience for travellers.
Lalit Sharma is a consultant at GEP. He has worked on numerous procurement consulting projects across various categories and is currently leading the end-to-end sourcing initiatives for a global pharmaceutical client across the business travel, fleet and meetings management.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content