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Home : Articles : eSourcing : Strageting Sourcing Manager

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STRATEGIC SOURCING MANAGER

While many companies have attempted to move toward a more centralized purchasing model, one area of purchasing has remained relatively unchanged until now. That area is business travel. Most companies do not incorporate their business traveling planning into their other procurement strategies and, therefore, continue to see a large chunk of their budgets wasted on overpriced hotels and costly airline tickets. Smart businesses now realize that travel arrangements are just as much a commodity as desk chairs or ink pens.

Part of the reason for the change has been the development of companies specializing in travel procurement consultations. These companies use complex software to allow travel arrangement decision-makers to determine what is the best deal for their business. By doing this, companies put themselves on more secure footing when it comes to negotiating deals with airline carriers, hotels, etc.

Using this type of software can be helpful, but it must be accompanied by a serious internal analysis of each companies' specific travel needs. For example, if one corporation travels to Asia regularly, they would not want to make a deal with an airline company that rarely flies to Japan or China. Likewise, a company that usually travels within the continental United States may not want to deal with an airline company that is primarily focused on overseas travel. Looking at these travel needs throughout the entire company can be difficult because it also requires evaluating future company growth and industry trends. If, for instance, a company decides to engage in offshore sourcing and needs to travel to India to set up the arrangements, but they've only formed a relationship for North American travel, then problems and excess costs can arise for the India trips.

Once a company has thoroughly analyzed and determined its travel needs, then the next step is to begin comparing bids from travel arrangement providers. In the past, some companies simply chose to use the hotel or the airline that seemed the cheapest at the time and did not bother to form relationships with these companies as they would with any other type of supplier. That's simply not a competitive strategy today. These businesses usually avoided negotiating with the travel-related industry because they felt it was too difficult to adequately compare bids.

Comparing bids for travel arrangements would seem straightforward, but the reality is that it can be tricky. In the past, companies didn't have any way of tracking or analyzing past travel, which it made it even more difficult. The problem with these comparisons is that sometimes what seems equal is not actually equal. For example, if one hotel chain offers a business a discount of 10% while a different hotel chain offers the business a discount of 25%, then it would seem like a straightforward decision. However, if the second hotel chain only has locations in the Untied States and most of your company's travels are overseas, then the savings would end up translating into increased off-contract spending.

One of the biggest benefits of taking travel planning to the procurement level is that it gives corporations more leverage. Since it requires that companies thoroughly assess their business travel history and evaluate their future, it gives them a clear picture of their travel needs, which they can present to potential suppliers. These suppliers can look at these needs and can see for themselves the profit potential from their side. Once they have this information, they will usually do what it takes to forge a mutually beneficial relationship with the company.

With rising oil prices and airline companies making their price structures more complex in order to recoup their losses after the 9/11 disaster, it has become increasingly important for companies to find ways to combat these rising expenses before they consume too much of the business's profits. Business travel is not a trend that will go away any time soon. Businesses need to implement strategies for saving money on business travel, just as they have for other company necessities.

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