Philips Outsources Global Program

<B> Philips Outsources Global Program</B>
<I>Rosenbluth Buys Philips' Agency</I>

By Sarah Welt

<I>Eindhoven, the Netherlands</I> - The Dutch company Philips Electronics N.V. rang in the new year by selling its company-owned travel agency, Philips Reisbureau B.V., to Rosenbluth International and consolidating its worldwide travel for the first time with the American travel management firm.

Philips also will move to a single corporate credit card vendor this year. It already has chosen the payment system company, though it will not announce the name for at least another month, travel department insiders said.

The entire Philips organization in January 1997 set an aggressive cost-savings target of 12.5 percent focused on four non-product related items--including travel and entertainment expenses, along with real estate, personnel and information technology--over the next two years. With operations in 60 countries, Philips has a worldwide air spend of about $200 million.

The Reisbureau, established in 1947, was the fourth largest agency in the Netherlands, with an annual air volume of $62 million. Philips included the purchase of the Reisbureau as part of the bid for its global account, saying it wants to focus its attention on investing in technology, reducing the number of suppliers used and providing stellar service at the local level, rather than on the day-to-day management of company travel operations.

For Rosenbluth, the purchase of the Reisbureau adds clout to an already fairly large operation in Amsterdam. According to Bob McGurk, Rosenbluth's vice president of business development, the sale makes it "the third largest agency when we finally lump it all together," adding 15 locations in the Netherlands and "a significant number of third party accounts."

All 100 Reisbureau employees will become Rosenbluth associates, and there are no plans to eliminate positions, McGurk said.

While Philips Electronics in the United States has outsourced its travel to Rosenbluth for the last nine years, the U.S. operation was part of the global bid, and would have switched agencies had a different global supplier been chosen, said Herman Mensink, director of worldwide corporate travel. Philips has been using 26 travel agencies outside the United States, and now plans to roll over all business to Rosenbluth over the next six to 18 months as part of the new four-year contract.

Philips travel operations in the United States and Holland have been moving toward global consolidation since 1992. Mensink and Bob Brunner, manager of corporate travel and executive services for Philips Electronics North America, together realized there was "a tremendous synergy to be gained," and eventually included Canada and the United Kingdom, "so we had a small group of four countries cooperating and where possible, leveraging," their travel volumes, Brunner said.

When it came to the travel agency bid, Mensink added, Philips "started with sending our RFIs to all current agencies in the 15 major spending countries within Philips." Internally, the global travel team also involved people from corporate legal, finance and mergers and acquisitions, and the third-party consulting services of Michael Whitesage of the Prism Group in Albuquerque, N.M.

All potential candidates were invited to a supplier day in Eindhoven where the entire Philips cost-saving initiative was explained to everyone by the board of management. Philips chose Rosenbluth because of its "technological expertise, the ownership of locations, chain of command, flexibility of the organization and customer focus," Mensink said. Brunner added that a strong point is Rosenbluth's "use of local management in local countries."

The Philips team was headed by Mensink, who oversees the directors of travel in four world regions, with Brunner responsible for the NAFTA region, Huub Smeets responsible for Europe-Middle East-Africa, S.C. Lim in Asia, and Francisco daSilva overseeing Central and South America. Brunner's region alone accounts for approximately 30 percent of Philips' total travel expenses worldwide. In addition, there are 52 travel managers in 60 countries. Mensink stressed the "sheer advantage we have by having set up this internal network of travel managers. Most of them report in direct reporting lines to the CFOs so we have a good layer of support."

That structure "will definitely increase," Mensink said, as the global consolidation goes forward. Also in the works as a communications tool is a Philips travel intranet site. On the automated booking front, Philips Reisbureau conducted a beta test of Galileo's PC-based booking system more than a year ago (<i>BTN</i>, Oct. 14, 1996), but decided not to implement the system at the time. The U.S. operation is "using all of Rosenbluth's products other than Dacoda, its yield management product. We held off on that because of the consolidation," Brunner said.

Rosenbluth's McGurk said the agency could build a hyperlink for Philips to its existing Web booking site and "according to the business plan will be integrating electronic booking displays" for Philips in the next six to 12 months. Philips "will use Dacoda and Vision and Vision Direct, our desktop reporting tool, to put information in the hands of travel managers around the world."

On the financial side, Philips has had a management fee in place for a year in the United States, but taking that fee approach global "is easier said than done," Mensink said. The RFP used a management fee as a starting point and "depending on local cultures we can always recalculate" to another financial arrangement.

"The only key we looked for is cost visibility," Mensink said. "Take a management fee structure as a basis and recalculate it into a revenue share. The local situation doesn't really change, only you know the cost structure underneath it."

Beyond the agency contract, Philips is stressing the importance of focusing on local culture in its relationships with travelsuppliers. The company is reducing its supplier base, but no global air contracts yet exist. Philips also has had a global hotel program in place for three years. When it comes to selecting hotel properties, travelers first see Philips negotiated rates, then Rosenbluth rates, before those in the open market, Brunner said.

Mensink also is moving toward a single global corporate card, and said that "before the end of '98 I would like to have 75 percent of all travel spend on one card," though he declined comment on which one. Philips U.S. has been consolidated with the American Express card since 1986, while Holland uses multiple vendors.

Car rental is still being defined on a global basis. The United States and Canada chose Avis as their single vendor a year ago.