Siemens, the multinational conglomerate, made real strides
in car rental and airline purchasing in the past year through the use of
electronic-bidding tools.
E-bidding is one of three areas, along with savings and
supplier rationalization, that Siemens is using this year to measure travel
program performance after a reorganization driven by a supply chain management
initiative brought the purchasing organization out of shared services and put
it under a central corporate structure. The new setup facilitates greater
strategy alignment and global development.
"To kick off our new supply chain management
initiative, we started with a true global car rental tender last November using
an internal tool," said Siemens director of mobility services Steven
Schoen. Use of such a tool was new for his organization and for many of his
vendors. "The process of setting up a global bid with regional and local
requirements entailed of lot of preparation, coordination and organization, and
was fascinating to watch," he said "The final bid period was a
15-minute timeframe. Halfway through, there were no bids, but I said, 'We still
have seven minutes to go. Just watch the screen.' After 13 minutes, it started
to light up. Two minutes later, we shut it down."
Schoen noted that there are many different types of
e-auctions, so it's not a term that can be used generically. While some
companies have used such auctions only for the price component, Siemens and
many others also build in service requirements. For some electronic auctions,
he said, "everything is in the system, and the system spits out the
winner. We still wanted to have some latitude based on local requirements."
Schoen said that the global car rental bid in the end didn't
really change the North American program too much because "we already had
a single vendor in that market, and the incumbent was aggressively determined
to retain our business." The company's "goal was to have a consistent
and more effective global strategy in this space, not necessarily to end up
with a single provider globally."
Use of a different e-bidding tool for airline purchasing,
however, was focused on the 300 top citypairs for domestic U.S., Canadian and
transborder flights.
"It was very interesting how the airlines reacted to
that," Schoen said. "Some of them were argumentative about this process.
Our response was, 'If it's against your business philosophy, don't participate.'
Some of them said, 'We don't do business this way.' We said, 'We've been doing
business your way all along. We call this buyer yield management with the goal
of creating more of a balance in this process.' "
In the end, all but one airline participated, Schoen said. "We
projected a number of scenarios about how this might play out because one of
our goals is to further rationalize our airline supplier base."
Schoen described the Siemens e-bidding process as having a
front, middle and back end. At the beginning, he lays out Siemens' terms and
conditions, not including price, for the bidding procedure. "If they don't
want to sign onto that on the front end, they don't even get to the bid
process," he said. "The rules of engagement are standard terms and
conditions up front."
He said there were two rounds of bidding. "When we
finished the first round, we went back to each of the bidders and showed where
they needed to improve. They had the opportunity to do a second round and on
then we analyzed how the results impact our strategy and savings.
Regarding the airline auction, Schoen, said that the company
is currently analyzing how the air awards "impact the system deals we have
in place. There were some surprises as to how the different airlines responded
to the opportunities in the different markets."
Despite the downturn, Schoen said Siemens still issues
approximately 850 tickets a day in North America, and its top 300 citypairs are
only about 42 percent of its air volume in the region. "That's why we have
to pay such close attention to our system programs and won't forsake them all,"
he said. Initially, the travel team only planned to bid out the company's top
100 domestic U.S. citypairs, but an internal group working with them asked, "Why
stop there?" Schoen said that group "even recommended that in this
round we do our top international citypairs, but that's where the global
strategy kicks in, so if and when we do that, we'll do it on a global level.
The transatlantic piece is very large and significant for us in both
directions, so we wouldn't want to do that as a stand-alone regional bid."
While many other companies have looked at using an
electronic bidding process to source airlines, most don't have the clout to get
the airlines to participate. For those that can, however, the process can
clearly change the way buyers and airlines interact.
"The nice thing about electronic bidding," Schoen
said, "is that you get away from the personal relationship part of it and
look at it more objectively—almost like an outsider looking in. We were very
satisfied by how this process worked out."
This story originally
appeared in the August 9, 2010, edition of Business Travel News.