Finding room for improvement in a mature travel and meetings procurement program can be challenging, but professional services firm Deloitte & Touche USA has managed to do so through a heavy internal focus on process efficiencies. Moving its management structure from a hierarchical to a process orientation has created uncountable service- and cost-related benefits for Deloitte, which has one of the world's largest business travel budgets.
Under the leadership of chief procurement officer Mike McMahon, Deloitte has streamlined its meeting/conference services and supplier relations processes, cracked down on preferred-supplier noncompliance and taken advantage of offshore resources to handle growing demand for meeting services.
"Once a large, complex travel program gets centralized, organized and systematized, where does it go next?" McMahon asked during an interview with Procurement.travelat Deloitte's Wilton, Conn., headquarters. "We have centralized contracting; we have aggregated all our demand. Now we're taking fine cuts at parts of our program that are high profile and have bigger spend. I think the best-managed companies have to take a look at why they are not employing Six Sigma with all significant travel management business processes. Other than that, you're in maintenance mode."
[PROFILE_1]McMahon's department took over responsibility for travel in 2003 and added global conferences two years later. For Deloitte, the travel and meetings sourcing groups do not "report to procurement" as they do at many other firms.
They areprocurement.
"We wanted experienced travel people managing the operation of travel and experienced procurement people managing the procurement of travel," said McMahon, who is also director of national services, which includes centralized travel management, meeting management/global conferences and centralized procurement. "It's easier to train the right, experienced travel people in strategic procurement techniques because you're surrounded by procurement people. You completely avoid the pushback that, 'Buying pencils isn't like buying travel.' Of course it's not. We rooted ourselves in experienced travel people."
As strategic procurement services director Michele Bryant described it, "None of the people in 2003 who were or are travel managers had any procurement experience, but now they could go toe-to-toe with the best of them in terms of negotiating, and they have embraced supplier relationship management." Bryant joined McMahon's department in 2001 from Deloitte's consulting practice, where she had been helping clients with travel procurement.
'One Door'
Starting about two years ago, Deloitte combined its hotel supplier relationships to include both meetings and travel. Managing 1,200 meetings a year, the company traditionally had significantly more than 1,200 contracts--clearly an inefficient process that was involving multidepartmental resources and creating costs for suppliers as well.
"There's a high correlation between meetings and travel," said McMahon. "The meeting venues, many times, are the same hotels we're using for transient. You start looking at this as a broadened supply chain that includes all transient travel and meetings and get a much broader view of how much you're spending throughout your company.
"We migrated from more of a hierarchical organizational structure to more of a process-driven structure, which is similar to what we did in travel about four years ago," he added.
The approach broke the typical meeting's "lifecycle" into individual processes that are not optimally all handled by a single individual: sourcing, registration, logistical planning, onsite management and closeout (reconciliation of invoices). Deloitte found that travel and meetings had sourcing synergies and decided to combine the functions with regard to supplier relations.
"So it's not just the guy from the transient travel group; it is also the person responsible for meeting sourcing sitting with the account reps from meetings and transient," said Bryant, referring to quarterly talks with major lodging suppliers. "We all talk about the numbers, why are we having difficulty at this or that property, and point out that when we spend so many transient dollars, the value of the total relationship should be measured as the hotel evaluates a contract."[PULL_1]
"Another benefit is that while the old meeting organization was very hierarchical--where the meeting planner did everything except some of the registration functions--we were growing meetings so rapidly, you couldn't add enough people to keep up with demand," said McMahon. "So in changing the organization to relieve these meeting planners we [maximize] world-class, senior meeting planners here. They love meeting planning; they don't necessarily like all the other stuff."
In addition to taking away negotiations, Deloitte moved the closeout process from meeting planners to an invoice-processing unit in procurement--all of which helped improve the quality of meetings because planners were able to focus on planning.
Organizing this way has implications for contracts, such that now Deloitte operates with a single meetings umbrella contract--a master services agreement--with a given lodging firm, and sets up individual addenda or scopes of services for each meeting. Previously, each meeting required legal review, specific terms and conditions, indemnifications and limits on liability. "Now we still do 1,200 scopes of services, but those take a lot less time," Bryant said. Her team and the hotel sales rep "can normally handle that, rather than sending it to legal for review."
Deloitte's structure centralized points of contact for service issues. Also, the firm's electronic RFP process each year includes questions on both meetings and transient issues.
"We have been sending this message to the major chains for a couple years--that we are going to start viewing them from one lens, and when they turn this around, they should look at their selling organizations," McMahon added. "It's hard to measure in quantitative terms, but there's definitely a process efficiency. Supplier relationship management is where all the value of strategic procurement is obtained for both buyer and supplier."
Compliance
Supporting preferred suppliers is a big part of another recent initiative at Deloitte, although ostensibly it would seem to have mainly an internal impact. Realizing that it could save more money by paying people to review out-of-policy reservations and make such bookings compliant, Deloitte last year built a cross-functional team supporting compliance to policy on the higher-cost parts of its program--particularly lodging and international air travel.
Procurement works "hand in glove" with a separate compliance department that employs two to four full-time equivalents on travel compliance. One compliance manager looks at all international reservations, pre-trip, and communicates with travelers if the bookings do not have a "logical reason from a price or routing perspective" to be on nonpreferred carriers, Bryant said. Having conveyed reasons why, the compliance official then moves the reservations to in-policy options--and travelers tend to accept that.
A hotel compliance manager checks records in cities where occupancy and rates are high, and where the firm has spending caps. Bookings over those thresholds prompt an email to travelers in which they are quizzed about why they made the booking--often for legitimate, client-driven reasons. If they do not cite such reasons, travelers are offered a preferred scenario.
"This is probably as strong as we get. It's never, 'We won't reimburse you,' " said Bryant. "We give the reasons why--for example, for savings--and that allows travelers to say, 'Here's why we need to do this.' With some people [booking out of policy] 25 or 30 percent of the time, the savings was enough to pay a person. We saved a multiple of that in getting people to change reservations.
"You could mandate," Bryant added, but mandates do not fit the culture of a partnership like Deloitte.
"Nine of ten times, when faced with the presentation, people are very appreciative," said McMahon, noting that the program helps educate travelers. "Generally, they are not doing it to spend more money--they just may have a belief that isn't fact-based about, perhaps, the supplier's services, and the primary compliance managers are familiar with the suppliers' services."
The compliance managers actually test products and services, and meet with suppliers to share with them travelers' issues that are hurting compliance.
"We're bringing, in a very transparent manner, all the major stakeholders that have some role in all of us being successful to the table and saying, 'How can we solve this problem together?' " McMahon said.[PULL_2]
As a result of the compliance program, Deloitte has raised the percentage of trips that comply with preferred airline policies to more than 80 percent. Compliance to preferred booking channels--whether the travel management company, BCD Travel, or online booking tool, from Travelport--is over 90 percent. Preferred hotel compliance is above 80 percent.
"We don't have mandates, and that's why our compliance numbers have been so much sweeter," said Bryant. "It's a softer and more easy-going process, emphasizing the benefits to the employee versus 'This is what the corporation's CEO says.' "
Depth and Complexity
Improving on compliance in this way also allows Deloitte to further refine what is a relatively mature program that differs greatly from those of many traditional corporations in terms of patterns.
Like its competitors, Deloitte travels more frequently and more often at the last minute than many corporations. While this is client-driven and service-oriented, it's also ripe for effective, if delicate, management. "We want to get the most out of the travel program while realizing we have to go about it a different way," said Bryant, followed by McMahon's description of the firm as four distinct businesses: audit, tax, consulting and financial advisory services.
More than 30,000 professionals representing the four different client service models are "traveling all the time from every major metropolitan city in the country," McMahon said. "While some companies can show a picture on a map and say, 'We use these two hubs,' ours looks like a spider web. It's mature, and once you do the hard stuff, like looking at your travel patterns and figuring out the optimal mix of carriers to satisfy travel demand and optimizing savings by flying against commitments to preserve or better your discounts--for us it's five, for someone else it's one or two or three--then there's not a heck of a lot you can do other than compliance."
Deloitte's two largest airline partners each earn about 20 percent of its share, with the next three falling between 15 percent and 20 percent.
"We still go through heavy analytics with all suppliers and feel pretty confident we do have really good rates," Bryant said. "We have explored some of the things you could do--for example, buy in bulk--but those will not work for us because of client billing. So, some of the more creative things a corporation could do to reduce spend, we cannot do."
Meanwhile, some elements of the firm's travel program are so complex and require such flexibility that they do not lend themselves to automation, McMahon noted. With a travel population that defines "road warrior"--people who can be on the road more than they are at home--manual service tends to beat automation for such elements as last-minute reservations, refunds and exchanges.
Offshore
As such, Deloitte is taking advantage of global labor trends. The firm has more than 5,000 employees in India with an expectation for that to grow to 8,000 in two years. About a year and a half ago, "recognizing the talent shortage we're all facing and the economic constraints of just adding more people," Deloitte formed a group at its Hyderabad, India campus to support some of its major procurement reporting and analysis functions, as well as certain meeting processes. The latter include building meeting registration Web sites and managing the registration process.
Now, McMahon said, Deloitte is looking at "other parts of the business processes, so we're taking fundamental, administrative things and asking, 'Why couldn't we?' We're looking at expanding our resources in India as another way for us to better manage our overall travel, meetings and conferences demand."
But McMahon and Bryant specifically ruled out handling transient travel offshore. "While some companies may have taken this approach for reservations, it is not a solution for Deloitte at this time," said Bryant. "It's an easy thing to talk about," said McMahon, but he doubted the service quality that an agent could provide "would meet our standards."