One of the chief problems companies experience when they create a procurement process is getting the employees to comply. Outsourcing to an ASP fixed the problem at Campbell Hausfeld, a manufacturer of air compressors and paint sprayers, among other machines. The company, which is based in Ohio, was spending $1 million a year on travel expenses getting its employees to and from meetings and distribution facilities throughout the US.
Campbell Hausfeld sells many products to Wal-Mart. "Employees were often traveling to Bentonville at the last minute. I saw some employees purchasing $1,200 tickets. Our people were paying anything to get there," says Deb Brown, who is now the company's Corporate Travel Manager.
In January 2004 the manufacturer hired Brown, a travel agent, "with the goal of reducing travel costs by 20 percent." She realized the company's employees were simply going online and booking the most convenient fare using a variety of Web sites and travel agencies. Many were visiting multiple sites to search out the best fare.
She knew she had to add some financial rigor to the process. In addition, the company was spending $30,000 in travel agency fees it wanted to eliminate.
Installing Online Booking Technology on the Intranet
Her first step was to outsource the procurement of airline tickets to Travelocity Business, a full-service corporate travel agency. "The key was to find a partner that could provide the technology and services to help our employees make smarter and more efficient travel decisions," Brown says.
In the beginning, she started slowly working with just 114 employees. (The company roster is over 1,200.) Today every employee can now book his or her own tickets online using Travelocity software on the company's intranet; the booking system is available 24/7.
If there's a problem, they can call an 800 number and talk to a live agent any time of day. Brown likes that because now stranded employees don't need to call her after midnight. Travelocity provides an agent for traveler advice when she is unavailable.
In addition to increasing traveler productivity, Brown is able to get employees to use the discounts she negotiated (the preferred airlines are highlighted on the display screens.) The company earned free tickets from mileage it accrued from using these preferred carriers, which Brown applied to business trips that cost more than $600. This further reduced travel costs.
The Travelocity system emails employees their travel plans and any schedule changes that may occur, making it convenient for them to keep track of their upcoming travels. Today 89 percent of the tickets are reserved with the online system, Brown reports.
Technology Aids Compliance
Step two was to implement a travel policy, which requires all Campbell Hausfeld employees to only purchase tickets through Travelocity's booking tool. She set price limits on itineraries; employees have to ask Brown personally if they want to take a flight that's $200 above the least expensive travel option.
Every traveling employee had to physically sign a copy of the travel policy. If they violate the policy, she can withhold payment of their expense accounts. (So far, she has not had to employ that Draconian measure.)
Travelocity sends Brown a copy of every ticket the employees purchase. "I can see immediately if someone is out of compliance," she says. If the ticket is too expensive, she can go into the system and rebook it. "Our online tool enforces her travel policy," says Scott Hyden, General Manager for Travelocity Business.
In the old days Brown says the accounting department saw a lot of tickets over $1,000. Today the average ticket price is $320. The company enjoyed a 30 percent reduction in annual travel costs and a 300 percent reduction in agency fees (2003-2004).
Hyden says Travelocity Business can offer these deep discounts because no humans touch 92 percent of its transactions.
The Association of Corporate Travel Executives (ACTE), an organization dedicated to the science of business travel management, surveyed 374 companies with more than 1,000 employees in January 2005. The study, which polled senior executives with financial and procurement responsibilities, found corporate use of online booking tools was rising. This year 44 percent of executives are now using online booking to reduce travel costs, up from 31 percent in 2003.
In addition, the ACTE study found new online technologies give executives a "clearer picture of how they spend travel dollars, which helps them manage costs more effectively." The study found more than 70 percent of surveyed executives feel their companies have an accurate way of tracking travel expenditures, compared to 56 percent in September 2003.
Like Campbell Hausfeld, 68 percent of the companies surveyed reported they experienced cost savings by using a corporate online booking system.