Crafting a new recipe for growth, Kraft Foods chairman and CEO Irene Rosenfeld last fall told analysts how the company planned to hit its "sweet spot" by "leveraging our scale, making strategic investments in marketing, sales and innovation, and establishing a world-class cost structure." Kraft's procurement, information technology and travel organizations had identified the ingredients necessary to support the new master strategy long before it was revealed in September.
In 2010, travel and procurement managers for Kraft's five regions--North America; Latin America; Europe; Asia-Pacific; and Central and Eastern Europe, Middle East and Africa (CEEMA)--sold senior management on the need for a single, globally consolidated travel management program in 72 countries for the safety and security of travelers, efficiency and savings.
"We needed improvements in technology innovation, accurate global security reporting, service-level agreements and global coordination of travel," said global travel and meetings associate director Madia Sargent.
Until last year, American Express was the primary travel management company for Kraft's five regions. But Amex did not cover 100 percent of the company's travel; Carlson Wagonlit Travel served Latin America while Kraft used other agencies elsewhere.
The business case for global consolidation included savings projections, but the decision was made to maintain or lower the management fee paid to the incumbent agency, according to Sargent. "It wasn't purely a financial decision" to drive savings, she said.
[PROFILE_1]Other forces that prompted executives to launch the global travel transformation included new senior leadership, the acquisition of Cadbury, global expansion, an improved traveler experience, visibility of data and a shift in corporate culture.
Kraft last year completed its acquisition of Cadbury, targeting "$1 billion in incremental revenue synergies--in addition to $750 million in cost synergies--by 2013," according to company statements. Combined with Cadbury, more than half of Kraft Foods' revenue now comes from markets outside North America. The addition of Cadbury also was expected to increase air volume in North America by about $7 million, with a significant boost in the United Kingdom and Ireland, Sargent said. Excluding Cadbury, Kraft's annual North American air spend was about $94 million; combined volume is estimated at more than $101 million.
Kraft travel manager for the Americas Diane Hoppe and travel manager for Europe, CEEMA and Asia-Pacific Adrian Witschi, along with Kraft procurement, initiated the request for proposals for a consolidated global agency, Sargent said. Based in Northfield, Ill., Hoppe, a 33-year Kraft employee, managed the travel program for the past nine years and led the global RFP. Based in Zurich, Witschi joined Kraft in 2008 after prior positions with HRG Consulting and in the hotel sector. Kraft's travel management team also includes two additional members who were instrumental to this transformation: global data analytics and information manager LeAnne Bell and BCD Travel contractor and technology manager Lark Stone, who manages online booking and intranet tools.
Senior management quickly realized the need for a global leader with extensive travel and meetings industry experience to provide oversight. A 25-year travel management veteran with experience on the hotel sales management, TMC and corporate buying sides, Sargent had expertise in strategic sourcing, business development, travel management (having led travel, meeting and expense consolidations and strategy at Brunswick Corp. and U.S. Foodservice) and account management when employed by BCD Travel.
In February 2010, Sargent was hired as associate director to lead the global travel program transformation and develop a meetings strategy for North America. Kraft in March selected BCD Travel as its sole global agency; implementation started in June.
"The integration of recently purchased Cadbury added to the complexity of the global implementation and transition," Sargent said. "As our financial systems and human resource systems were not yet fully integrated prior to the agency implementation, we essentially implemented as two simultaneous accounts in most countries."
In North America, Kraft in April 2010 outsourced all indirect spend procurement to Capgemini. Consultants Christine Scoolis and Christine Lloyd work with the Kraft travel management team to analyze procurement and spend management, and recommend ways to better leverage it. In each of Kraft's other four regions, an internal procurement manager works with the travel team on sourcing initiatives.
By July 2010, Kraft introduced a global travel policy as a guideline, with regional travel and expense policies that differ due to cultural or legal requirements, Sargent said. Policy changes were kept to a minimum--essentially everyone is following the same global travel policy."
Booking Tools By Region
Regional nuances, combined with the desire to dramatically boost online travel adoption in certain locales, prompted Kraft to select booking tools by region, Sargent explained. The company previously used Amadeus e-Travel in North America and Europe but "nothing else anywhere else. We stayed with e-Travel in [most of] Europe, but changed to Concur as our primary booking tool in North America and most of our major markets outside of Europe. We have one country with GetThere and two BCD proprietary tools in China and Brazil."
In France, employees used Expedia's Egencia. "The move back to a traditional agency and e-Travel was a significant adjustment to the online service they had become accustomed to, but it was done for reporting and security consistency," she noted.
Cadbury already was a Concur travel and expense customer in North America, the United Kingdom and Ireland. "One primary reason for selecting Concur was so that we wouldn't have to disband Cadbury's current travel and expense systems," Sargent added. "Concur was the tool with the best fit" across a majority of the organization. Kraft has long had a separate expense solution, but this month contracted to use Concur's expense solution in North America and Europe.
Marketing The Plan
With four new booking tools--along with the relaunch of its existing tools--a new agency, a global travel policy and a more comprehensive program to roll out around across all regions, Kraft turned to a marketing firm to help develop a master communications plan.
"We developed a global communications and change management plan with support from both change management and communications experts that was distributed and used by all implementation teams regionally and locally," Sargent said. "We did a lot of the writing, but the communications and change management plans, although standard, were adjusted slightly market by market."
The booking tools were introduced as a "big solution" with live training in key cities, webinars and other resources provided to travelers and administrative assistants. Admins asked for a lot of functionality. Particularly in North America, they liked Concur's unique displays and direct connect with Southwest Airlines. "Booking online in North America went from 62 percent to 84 percent overnight," Sargent said.
The nine-phase travel consolidation initiative started in April 2010, with the largest implementations in North America and parts of Europe launching in September. As of January 2011, Sargent said, "we're in phase six with 20-some countries left in the CEEMA region and three in Asia-Pacific," and on track for completion in May.
One of the biggest advantages to a speedy implementation was the ability to take "one data feed for every employee across the globe" from the company's human resources system for the travel agency and booking tools, Sargent said. Cadbury remains on its own human resources and financial systems, and generates a separate feed to Concur Travel & Expense and BCD. Once Kraft and Cadbury are on the same financial and HR systems, Sargent added, she expects to integrate Cadbury and integrate travel and expense in North America and Europe for Kraft this year and next.
Tapping Tech Power
"One thing that's interesting about Kraft, and I've never seen this before, is that I actually don't report to procurement, finance or HR," Sargent said. "I report to IS [information systems], specifically to enterprise shared services, which reports to the CIO. It's a significant benefit because IS understands and supports innovation and technology."
As part of the global transformation, Kraft's travel team and the director of global security created new reports and duty-of-care plans.
"We have developed a rather comprehensive global security incident management plan, both pre- and post-trip," Sargent said. "We travel to 72 countries and have to make sure that we're constantly keeping the security risk levels up to date. Today, we can advise one agency that there is no more travel to Indonesia, for example, and we're done. When you have multiple agencies, the urgent coordination and implementation of risk ratings and travel restrictions is challenging."
With just one agency, Kraft also "eliminated all but a few pre-approval processes in place around the globe," Sargent said. "Through BCD, we can manage travel policy, service expectations and preferred vendors."
[PULL_1]While the elimination of pre-trip approvals appears to be contrary to steps other companies are taking to more closely monitor bookings [see Indicators, page 12], Sargent said, "One of our core values at Kraft is to act as an owner. We provide the tools and management to help guide our travelers."
In North America, which represents 60 percent of Kraft's travel spend, "we actually have one of the best practices I've ever seen. We aggregate reams of travel and expense data to generate manager-level cost-center exception reporting on a monthly basis. We take raw data, put it through a third-party reporting technology and push out exception reporting for air, car and hotel to every manager for every direct report booking outside policy."
"When we initiated the exception reporting process in March, Sargent said, "there were a large number of exceptions: people booking less than seven days or otherwise violating one of the policies. Exceptions number significantly less now. Travelers are much more aware of the benefits of changing their behavior."
With just one agency, global reporting also has improved significantly. "With a global service-level relationship, we can hold one agency accountable," Sargent said. "When there's an incident and you're dealing with 20 different agencies, it's virtually impossible to get accurate global data. We were paying to consolidate our data [previously], and it was never completely accurate. Now we're dealing with one agency and getting global security reporting, travel management reporting and better insight on preferred vendors."
Kraft, along with strategic procurement partner Capgemini, at year-end 2010 completed a global hotel RFP--touted by American Express Consulting Services as "best in class"--and in early January conducted an audit to ensure that the correct negotiated rates were loaded, available and bookable in all channels.
"Our first rate audit yielded an 84 percent loading rate; 84 percent of more than 800 preferred hotels have loaded our rates across the globe, primarily because we only dealt with one agency," Sargent added. "Our second audit, completed in early February, yielded 96 percent loaded. Just the coordination globally was very beneficial."
Travel management and procurement managers expect the consolidated data that began flowing in earnest in September to help them identify new ways to leverage spend, improve policy and strengthen the program. But Kraft had not yet collected enough data to talk savings and leverage potential.
Kraft also utilizes virtual communications and promotes alternatives to travel. In an interview with Cisco Systems last year, longtime customer and Kraft global information systems senior vice president and chief information officer Mark Dajani was asked to detail the benefits of virtual communications: "The savings from reduced travel are small compared to the other benefits network communications is bringing to our company. I think the most important thing about reduced travel is how it improves the lives of our employees. With good network communications, they don't have to live in airports and be away from their families as much, and they don't necessarily have to stay in the office to make those final calls or finish a report. Now they can do it on the go or at home near their families and friends.
"For Kraft's bottom line, however, I think the network's greatest benefits are the speed of execution and the speed of decision-making that it facilitates," Dajani added.
Lessons Learned
Despite the pace, breadth and dual-pronged approach of this consolidation, the program implementation "went very smoothly," Sargent said. "We certainly have some opportunities for improvement in some areas of the world. For example, although Latin America is begging for it, online booking technology is not ready."
Compared to consolidations she previously managed, Sargent acknowledged this project was in a different "stratosphere. It was a region-by-region sale to stakeholders. We got buy-in from 72 countries to consolidate within 6 months. In China, however, we just got that buy-in a few months ago."