<I>Breda, The Netherlands</I> - 3M has become one of the first companies to devise a tool that has eluded countless travel managers: the pan-European air deal.
3M recently concluded five deals simultaneously, with British Midland, Northwest Airlines, Iberia, Air France and Alitalia. It expects to save "millions of dollars" each year on its $30 million pan-European air spend, said European travel purchasing manager Piet Stokman.
At the same time, employees are benefiting because all travel with the five selected carriers is in business class.
3M appears to have structured a deal that, like its Scotch tape, will stick. As part of the deal, 3M has issued a consistent travel policy across Europe for the first time. Making the policy one class only will undoubtedly be a morale booster. In the past, 3M colleagues from different countries often boarded the same flight, only to find that one was sitting in the front of the aircraft and the other in the back because their divisions had different policies.
Numerous companies have tried to negotiate a single discount arrangement with the same airline across Europe, but efforts have foundered for various reasons, including inability to provide accurate data, difficulties in apportioning rebates to each national business and airlines' doubts that clients can enforce policy.
The catalyst for 3M's deal was its efforts to consolidate agency services under one European travel agency, Carlson Wagonlit Travel, at the beginning of last year. Armed with consistent management information for the first time, Stokman was able to analyze spending accurately. He discovered that 3M's European employees were using no fewer than 130 airlines between them but that most of the spend was limited to 20 carriers. Stokman approached all 20 about a pan-European deal. What was crucial at this stage was his ability to assure the airlines that market share would move toward them in return for leveraged discounts. "It is very nice to do a clever analysis, but that is no use if the business travelers are not obeying policy," Stokman said.
Ensuring traveler compliance required skillful political work. On the one hand, the 3M corporate culture is such that "when management makes a decision, it is normally followed by employees," Stokman said. But the culture also empowers employees to make decisions for themselves.
The answer to this dilemma was to make the travel policy highly recommended rather than mandatory and to win employees over with high-quality service and good public relations. Putting all flights in business class took care of the service issue, and public relations was done by consulting with employees. Stokman carried out all the analysis and negotiations himself but reported back constantly to a pan-European group of office administrators and local travel managers called the European Office and Administration Council. He also used the group as a sounding board to learn the requirements of 3M's 3,000 to 3,500 business travelers.
Stokman then presented the deal to the company's vice president for Europe and Middle East, Eduardo Pieruzzi. "It is essential to get internal buy-in and then senior buy-in," Stokman said. He issued a bulletin to all employees just before Christmas 1996 explaining the new deal structure and outlining policy.
The quintet of airlines that put its faith in Stokman to deliver policy compliance has been rewarded. Figures for January showed that he won 80 percent compliance on routes flown by preferred carriers in the first month alone-and many employees were not even aware of the changes until they returned from vacation after the New Year.
Stokman hopes for better still by the end of 1997. "I will be happy if in the first year we hit 90 percent plus," he said. Achieving 100 percent compliance, however, will be impossible. "Mandatory policy is not in the 3M spirit,'' Stokman said, "and some schedules may not always meet our needs. But if a person is frequently taking non-preferred carriers, there needs to be some explanation.''
Stokman attributes one reason for the project's success to 3M giving him eight months to concentrate solely on this one task. He previously spent 50 percent of his time as purchasing manager for Benelux and the other 50 percent as European purchasing manager for consumer markets, one of 3M's business divisions.
Coming from outside the travel industry also helped him to question assumptions about what could and could not be achieved, and Stokman thinks even his nationality helped him. "I am Dutch; we are natural traders,'' he says.
It was perhaps his lack of preconceived notions that helped him overcome some of the stickier problems associated with pan-European deals. The question of tracking flown data is one area he will pay particular attention to in his end-of-year analysis, but Stokman believes that ticketed information is accurate enough for his purposes.
On the question of dividing the airline rebates among each business, the solution could not be simpler. "We have asked the airlines to issue credit notes to each country,'' said Stokman. If, for example, Germany is responsible for 25 percent of 3M Europe's flights with Northwest, it will receive 25 percent of the rebate.
Even individual business centers will be credited with a rebate. "That is very important,'' Stokman said. "We can show them they will be rewarded for their effort.''
All the pan-European deals are for one year only, so that all parties can review whether the strategy has been successful. "It could be that 3M's airlines in 1998 are different from 1997,'' Stokman said, "but non-preferred carriers will have to come in with much better deals than before to wipe out the preferred suppliers of 1997. We will be loyal to them.''
Stokman is more than happy to find additional deals as long as they do not interfere with existing contracts. He is now close to finalizing pan-European deals in car rental. He has scheduled hotel deals for completion by the end of July.