SmithKline Beecham Leverages 2 Global Agencies

SmithKline Beecham Leverages 2 Global Agencies

By Sarah Welt

Philadelphia - SmithKline Beecham has been spending the summer talking with US Airways and Wyndham Hotels about the feasibility of bulk purchasing, and using a unique teaming of its two agencies to devise the logistics to manage company inventory.

The initiative is one of 10 potential projects on a short list the pharmaceutical giant has identified as offering the best possible return toward its ultimate goal of reducing its $145 million worldwide travel and entertainment spend.

SmithKline, with $42 million in U.S.-booked air volume, began in March to sit down on a quarterly basis with its two agencies, Rosenbluth International and Carlson Wagonlit Travel, to share ideas on ways to reduce travel-related costs and to achieve the savings that the agencies are incentivized to help provide. Among them, they have identified 67 action items worth exploring. Along with recommendations on bulk purchasing, the list includes negotiating preferred deals with its airline partners, consolidating meetings, revamping the company's hotel program on both sides of the Atlantic and the possible use of alternative airports.

Janice Bailey, SmithKline's global and strategic purchasing manager, refers to the three-way strategic alliance it has established with its agency partners as "a co-opetition--like a cooperative competition," she said.

While Bailey knows the two agencies are natural competitors, SB tries to discourage competition on its account. "In countries where CWT or Rosenbluth is the incumbent, neither one can cannibalize the other's business unless one is up for bid," Bailey said.

Rosenbluth handles all travel in the United States, Australia, Japan and Italy, and this year took on Canada as well. Carlson Wagonlit handles SB's travel needs for the United Kingdom and Europe, except for Germany, which is serviced by Hapag-Lloyd. "Based on where we have those two agencies, we are covering 95 percent of our worldwide spend," Bailey said, "and we are in the process of looking at other countries." It plans to add Latin America, Argentina, Ireland and Denmark to the consolidated program by the end of 1999.

SmithKline's travel has been centralized with Rosenbluth in the United States since 1992, and it is in the process of finalizing a new three-year contract with a two-year renewable clause. The contract includes a flat management fee that will not increase for the next three years, similar to the contract the company has with Carlson Wagonlit.

On the airline front, Bailey estimated the company is saving $8 million a year through negotiated discounts with preferred carriers, on a total worldwide spend of $100 million. SB has discounted net fares with Northwest, United and US Airways, and gets a discount from British Airways in the form of a rebate. With travel between the United States and the United Kingdom accounting for 27 percent of its total, SmithKline is BA's third largest corporate customer, Bailey said.

To further hold down costs, the pharmaceutical company this month plans to push the use of electronic tickets to all travelers. "We have identified $100,000 in savings by avoiding having tickets delivered overnight," she said.

The strategic alliance and airline program are just part of a massive travel initiative going on within the company. Bailey came on board last October to assist Tom Stone, the London-based manager of global & strategic purchasing. And purchasing category manager Nancy Dornfeld last month joined the travel department in Philadelphia to handle all hotels and car rental deals in the United States. In addition, Stone has been assisted for the past year by Barbara Wallace, purchasing category manager, to provide a hotel program overseas.

It's Bailey, however, who will spearhead activity on the next major travel-related challenge: consolidating meetings. McGettigan Partners handles the meeting program onsite in the United States. Bailey's first step will be to centralize the U.S. piece, which is running parallel with a U.K. initiative on event management (Meetings Today, Jan. 27, 1997).

While Bailey will consider both CWT and Rosenbluth for its meetings business, it is informally benchmarking with other pharmaceutical companies before making a decision this month.

Dornfeld, meanwhile, will focus on developing a domestic hotel chain contract. She is talking to Wyndham, "looking at where their locations are in major cities and where we are to see if there is a matchup," Bailey said.

The firm negotiates its own preferred hotel properties in major cities such as Minneapolis, Philadelphia, Pittsburgh and San Juan. It does use Rosenbluth and CWT, however, to negotiate other top cities around the world. "In 1999, there will be more focus on SmithKline Beecham negotiating directly for major cities," though, Bailey said.

Both the U.S. and overseas operations rolled out a global hotel directory last month that lists all preferred locations and their negotiated discounts.

By the end of this year, senior management is interested in reviewing SB's corporate travel policy, which "hasn't been looked at in three years," Bailey said. Current policy dictates business class to Europe, though different divisions fly coach based on their budgets. Non-compliance is monitored by the various business sectors; in the United States, Rosenbluth sends reports directly to the individual responsible in each business unit, while Bailey gets a summary report.

Unlike many of its competitors, SmithKline Beecham does not have a corporate intranet, though it plans to have one in about a year, and it is not rushing out to get an automated booking system. While its research and development division is conducting a pilot of Rosenbluth's E-Res, it still "needs to be convinced of the value," Bailey said.

The company's 3,400-person sales force will never all have Internet access--and instead of spending their time on booking their own travel, "they should be out there selling," in Bailey's opinion.

Automated expense reporting, on the other hand, is of more interest, though implementing anything in the near future will be made difficult by the fact that the United States and the United Kingdom use different internal systems.

SB uses Hertz as its primary car rental vendor, and American Express as its corporate card, though France and Canada use other cards.