Anybody out there looking to pick a fight about the role of procurement in the travel category? I found this post on TheBeat.travel, an active forum for topics related to the business of travel.
Holly Hegeman, who closely tracks the airline industry on her well-respected site Plane Business, made this comment:
“Oh and the procurement method of purchasing travel? If your company is still doing it — you need a new CFO.” (Her full post is here)
My response is copied below, and yes, I defended procurement’s role and capabilities. But the more important question is this: Why does procurement get a bad rap when it comes near the travel category?
I’ll gather my thoughts next week. (Update: See them here) Meanwhile, what are yours?
(My response to Holly’s post follows, emphasis added)
Hold yer horses, cowgirl…these here are fightin’ words:
“Oh and the procurement method of purchasing travel? If your company is still doing it — you need a new CFO.”
I’ve seen two main ways of negotiating travel supplier contracts. One involves relying heavily on relationships between travel managers and travel suppliers about service capabilities,responsiveness and pricing. The key is that the buyer trusts the supplier to be able to serve the account, and trusts that the supplier is pricing its services fairly. Let’s call this the relationship-based method.
The other negotiation method relies on competitive bidding, clear analysis and diligent negotiations. The key is a fact-based assessment of capabilities and the corresponding pricing – and value – offered by the suppliers. I’ll call this the procurement-based method.
This may be where we part trails…perhaps you meant “Procurement method” to mean something else?
Quite a few travel managers have been rubbed the wrong way by their procurement colleagues when travel gets taken under procurement’s wing. Sometimes for good reason, as when procurement folks try to source travel without taking time to understand its unique characteristics. Here’s a video that those folks should watch: Introduction to the Travel Category
The typical cry from travel managers is “you can’t buy travel like you can office supplies”. Agreed, but don’t make the mistake of assuming that procurement professionals focus solely on price. That’s a fear perpetuated by some travel managers who are threatened by the risk of having their long-standing, sometimes-too-cozy relationships threatened by the fact-based procurement approach.
In this economy, it’s hard to argue against any form of cost-saving. Travel is a logical place to look. It should be no surprise that CFOs ask their procurement folks to use proven methods to make sure that the travel spend is procured as well as any other category.
Excellent point – for years travel ‘purchasing’ was based upon relationships and these weren’t always reality when it came to deals. As data aggregation, reporting and technology have improved it has, in many cases validated or invalidated prior decisions – and relationships. It’s always tough to lose an old friend but when you find out your friend was really costing you money the facts shouldn’t get in the way of a good decision should they? A balanced mix of relatonships and procurement based purchasing need to be applied. Thanks for helping to apply some logic and science!
I agree that negotaitions on both sides of the table shouldn’t be based solely on relationships. It must
be stated however that some metrics used by procurement to decide on travel services are misguided. Take for instance online booking tools. When coming to a realization that transaction fees were lower on tools over agent transactions the emphasis was pushed thru volume of transactions. Well the transactions cost was/is lower but the end result of the fare costs were/are not in all cases. The TOC is what the bottom line should be not the transaction price. In an effort to drive down price I feel some of the understanding has been lost. Travel is not a commodity.
I do think Procurement
has become a bad word from the travel professional side which it shouldnt. I do feel though that some of the buckets travel is tried to fit into by some doesnt fit and thats where the rap comes from. If there was way for travel pros to get a true understsnading of what the metrics are and how you are measuring them then that stigma will go away, until it doesnt then the it wont. I’ve talked to hundreds of procurment folks in my 7 years in travel and more often then not I’ve heard fill out the qoutes/rfi/rfp and then we can talk. Without the talk and i cant know what your measuring me against or what the process is? It doesnt allow for a creative look its an uneducated guess into how it might work.
I know this was a long thought but I know I’m not the only one thinking it.
Pingback: Why Travel Disses Procurement… « Gillespie's Guide to Travel Procurement
Pingback: Most Popular Reads of 2009 « Gillespie's Guide to Travel Procurement