Enter the world of supersized capital projects--like the Trans-Alaska Pipeline, power plants, refineries or environmental cleanups--and you'll find Fluor, the largest publicly owned engineering, procurement, construction and project management enterprise. The nearly 100-year-old company has traveled to the remote corners of the globe for corporate and government capital projects for more than half of its existence.
But only in the past two years has this global behemoth also begun a multinational travel management project designed to deliver savings, cost efficiencies, improved services, traveler tracking and security to its globe trotting traveler base. By August, Fluor expects to have consolidated 89 percent of its spend with American Express Business Travel, identified potential savings and garnered the data necessary to leverage its substantial volume.
How substantial? Fluor doesn't yet know the exact figure, but it has identified more than $120 million in air from offices in Asia-Pacific, Canada, Holland, the Middle East, South America, the United Kingdom and the United States. An accurate figure is expected to emerge in August, when the 15-month consolidation is finished.
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Regional Approach
"Fluor is a project-orientated company, which had left travel management to the individual regions," said Fluor global travel director Kevin Brady. It also is a company that reported "2008 was without a doubt the strongest year in the company's history, with record-setting revenue, earnings and new awards," according to chairman and CEO Alan Boeckmann.
Fluor reported sales of $22.3 billion, up from $16.7 billion in 2007, and net earnings of $720 million, up 35 percent from a year earlier. It reported more than $25 billion in new awards during the year and a record backlog of more than $33 billion worth of projects contracted, but not yet started.
Despite its good fortunes and optimistic forecasts for 2009, Fluor plans to intensify efforts to reduce travel costs as part of its emphasis to continually improve its competitive position. Included in the efforts to reduce overhead announced by the CEO in February are substantial reductions in internal and other non-project-related travel.
"We are taking a very deliberate and structured approach to overhead cost control. I would not label any of our cutbacks draconian," Boeckmann told analysts on a February earnings call in which he referenced the initiative, but provided no additional detail. "We believe we can cut back on discretionary items that help balance that earnings projection and will continue to evaluate throughout the year."
Looking Back
In recent years, designated travel managers or procurement executives in Fluor's major markets managed travel, negotiated preferred supplier contracts and contracted for travel management services.
[PULL_1]"It is a company where price isn't everything," Brady said of Fluor. "We use the term 'best value' instead of 'lowest price.' We use business class for anyone traveling internationally. We don't like to mandate. We like to let managers manage," but most are not travel experts, Brady said. "Part of my role is to educate, so communication is key."
Instead of major metro areas, Fluor's travel typically is to secondary cities: the field locations of its projects and where many of its 60 sites on six continents are located. Projects are often in remote areas, and travel volume lasts only as long as the particular project. Consequently, travel patterns, top city pairs and destinations change frequently from year to year, Brady said.
"There was no integrated global strategy to the airline, hotel or rental car business. We were using one agency in South Carolina, but it was only capturing 60 percent of the spend," Brady said.
All that began to change in 2007 as company executives began to recognize the bottomline benefits of center-led procurement, strategic sourcing and leveraged spending. Fluor executives recognized that the company's decentralized approach to travel management needed to be changed. Fluor developed a request for proposals for a global travel management company, evaluated bids and last year awarded a contract to American Express Business Travel.
Beyond better cost controls and savings, Fluor was concerned about security--of data and personnel. In its decentralized travel management structure, the company couldn't identify how much it spent on travel, who was traveling or where travelers were in the event of disaster. A global travel management program was needed to plug the holes.
Senior procurement director Jim Jacobsen was brought in about a year ago, tasked with the initiative and the hire of a global travel director. Jacobsen sought out someone with proven expertise in multinational travel management who would buttress his own contract management skills. With his 36 years of travel experience, Kevin Brady was precisely what Fluor needed.
After stints with airlines and travel management companies, Brady managed the multinational travel program at Merrill Lynch for 20 years. Two years ago, he sold his employee stock, moved to the port city of Wilmington, N.C., and for a year did some interim project consulting as the financial markets collapsed. After the consulting, Brady was seeking his next travel management challenge when he learned that Fluor needed someone to manage a global consolidation.
Consolidation Begins Day 1
Brady started on May 19, 2008, the day Amex began implementing in the United States. Company officials, guided by a consulting firm and American Express, initially planned a fast-tracked global consolidation to be completed in less than one year.
American Express started consolidation in the United States, Fluor's largest travel market, and moved onto Canada in August and the United Kingdom by October. In the United States, Travel International of Greenville, S.C., previously served Fluor with a combination of onsite offices and reservation centers. There was minimal use of the online booking tool, at 8 percent of total U.S. spend.
Online tools became a centerpiece for savings, data and leverage in the new program. Fluor opted to use Amex's Axiom (a private label of Rearden Commerce) in the United States, Concur's Cliqbook in Canada and Sabre's GetThere in the United Kingdom. A booking tool had yet to be decided for Holland or the rest of the world at presstime, but Brady said he and his online booking tool expert were determined to select the best tool for each market. Without a mandate, 30percent of Fluor's travel in the consolidated countries was booked online by year-end 2008.
In the United States, the technology was supplemented by a VIP desk at Fluor's Dallas-area headquarters, as well as American Express reservation centers in Houston and in the United Kingdom. Another res center in Europe is under consideration.
The company thought U.S.-based air spend was about $45 million. "It looks closer to $70 million or $75 million," Brady said. But U.S. travel also has been growing, he said, with volume up 8 percent to 9 percent last year over 2007 figures.
Building A Global Team
In addition to Jacobsen and Brady, Fluor's global travel management team includes Iris Mendez, charged with global operations and reporting, based in Greenville, S.C.; DeeDee Romano, responsible for global vendor relations and executive services; Calgary-based travel manager Donna Jones, who splits her time between day-to-day management of the travel program in that country and online development, marketing and communications of the global initiative; and information technology analyst Tomas Billitti, who oversees IT and governance issues, based in Aliso Viejo, Calif.
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Data on Fluor's travel spend has been tough to find, despite the search in the usual places: general ledger, agency data, card data, expense data and local offices. Brady began the hunt for travel spending data at offices around the globe, then tried Amex card reports. Fluor has centrally billed business travel accounts for air, as well as individual corporate cards. However, "not everyone has a card," Brady learned.
Fluor's travel team also surveyed 30 of the company's global offices to garner basic travel data. They asked the procurement or country manager who received the survey to identify the person charged with managing travel; their regional air, hotel and travel spend; and preferred contracts with travel management companies and other suppliers. They also asked the local offices to forward copies of any travel contracts.
Accounts payable was the next step--"that's the whole universe" for spend data. "We found over 1,900 transactions not going through any agency that we recognized," Brady said of the "significant amount" of leakage.
Where's The Spend Globally?
"Our biggest spend in Europe is in Holland, with about $5 million," Brady said. In Asia-Pacific, where one person in Shanghai leads travel in the region, Australia represents the largest spend at $6 million to $7 million in annual air costs, he added.
Brady and others also traveled to major offices to discuss their travel management programs and contracts, local nuances, globalization plans and a timetable. In Europe, they learned they would need to delay by six months the switch to American Express due to requirements to provide the incumbent with adequate notice of the contract termination. The "aggressive" globalization plan was adjusted as the team outlined a consolidation to be completed by August of 2009.
Along the way, the team also developed a "lessons learned" document to apply learnings from each country to the next. For example, integration with third party software, security reviews of online booking and travel Web sites, and even rate loading for hotels were among the hurdles the team had to clear in the early consolidations. "Issues we faced, we'd tackle those first to ensure" problems were not repeated, Brady said.
Selling The Concept
A centrally managed travel program should deliver 5 percent to 10 percent savings compared with a decentralized program, Brady contended. With the unmanaged spend identified, the opportunities for savings were growing.
While all of Fluor's 42,000 employees were "notified that this is the firm's decision" to globalize travel, "it's up to managers to communicate the details. My job is to help sell it to all the managers," Brady said.
"We're going to the heads of procurement in each region and getting the buy-in there first," Brady said. "Travel generally reports up to these areas. We've already spoken to the person who heads procurement in Asia-Pacific, and she supports the consolidation. Plans call for consolidation in that region later this year.
"We have to sell the program," Brady said of the globalization. "We're determining local business drivers and needs to do that." Buy-in is critical to deliver the savings, he said, noting he hoped to "talk to the business unit managers to help them understand all of the savings potential" and various cost saving methodologies of global travel consolidation.
Fluor's latest overhead reduction efforts also prompted the new travel team to redraft the global consolidation timetable and to "manage more without incurring large travel costs. We expect American Express to help pick up the slack as we have outsourced more of the program," Brady said.
"We don't know for sure what the spend is, but it's really the spend and percent of spend captured--not the number of locations--that is important to track. Therefore, we are attacking the bigger spend first." Brady estimates that the company will capture 89 percent of its travel spend after consolidating the United States, Canada, two locations in Europe, China, Singapore and Australia.