Pilkington Restructures Global Travel As Commodity
<B> Pilkington Restructures Global Travel As Commodity</B>
By Sarah Welt
<I>Toledo, Ohio</I> - Glass manufacturer Pilkington plc began 1998 with a companywide reengineering process designed to restructure the purchasing side of the business. Now all commodities have global supply managers assigned to them and for the first time the company's $80 million worldwide travel volume is being considered like any other commodity.
As Pilkington's new global supply manager for business travel, former International and National Business Travel Association president E.J. Hewitt has been working since March to negotiate global deals with vendors, consolidate business with one agency, incorporate videoconferencing into the travel selection process and evaluate automated booking tools.
The purchasing initiative was launched in January and conceived by group purchasing director Edward Smith, who is located at Pilkington's global headquarters in St. Helens, England. Hewitt said Smith was hired specifically to come in and restructure the purchasing side of the house. Smith first appointed regional heads of supply management, assigning people in North America, Australia, Asia and Europe. The next step was to look at the commodities on which Pilkington spent the most money and have global supply managers lead those purchasing efforts.
"One thing that we are struggling with in the business travel part is that we have to have measurement and delivery against the total acquisition cost," said Hewitt. "When you have a commodity, you usually compare the price you are paying now against the price you paid, but business travel is unique because there are so many parameters that enter into purchasing business travel--time, staying for a Saturday night--all things you don't have when purchasing a straight commodity."
Since taking over the global travel purchasing role, Hewitt's job description has been more clearly defined. Previously, she was responsible for negotiating for Libby Owens Ford, which is owned by Pilkington. But her responsibilities there were "sort of all over," she said. Now under the new procedure, "what I am looking at is strictly addressed at the purchases for the suppliers--air, car, hotel and systems that are available to complement the processes."
Hewitt also has been responsible for negotiating agency contracts. The company consolidated the majority of its business with American Express in April under a multinational contract. The intent is to move all business to Amex in the future, but first Pilkington needs to identify all its business travel worldwide. Hewitt will be attending a meeting in Amsterdam at the end of the month with all Amex offices that touch Pilkington's business to try and reach that goal.
On the air side, Hewitt has negotiated a global contract with American Airlines and is evaluating other vendors. Its goal is to work with no more than five carriers.
Hewitt also is in the process of negotiating a hotel chain deal that she hopes to finalize in the next three months. Additionally, she is trying to coordinate communications between Amex offices around the world, so that the agency can track bookings and make sure all travelers are using negotiated discounts.
She said the company wants to get away from hotels being booked by its hosting facilities around the world. "If we had someone traveling to the technology center in England, most of the time secretaries or plant people would make a reservation for them, and they negotiated locally," she said. "None of that was shared with the other offices."
For car rental, the company began a global contract with Avis on Aug. 1. Pilkington still has several locations under contracts with other suppliers, however. Hewitt is working with manager of group risk/insurance Graham Foggon to determine the optimum way to cover liability on car rentals.
Videoconferencing is another way the company hopes to save money on travel. "I have been asked to review videoconferencing to make sure we look at all alternative methods before we hop on the airplane," Hewitt said. "It will never replace travel but it will shorten the decision-making time and turnaround."
On the technology front, she has been evaluating Amex's AXI product and Worldspan's TripManager. Pilkington also is launching an Internet home page that will contain business travel information and be used as a communications tool throughout the company.
As for savings goals, the company has guidelines but nothing has been standardized yet, though that will be addressed at the Amsterdam meeting. Headquarters currently compiles all the data and tracks savings, but on the travel side, "we are still massaging that," Hewitt said. "I can identify what our savings are but we are trying to put it into some format that is truly acceptable to financial people so that it can be a true measurement.