Savings In The Cards For Hallmark
<B> Savings In The Cards For Hallmark</B>
By Sarah Welt
<I>Kansas City, Mo.</I> - As part of a companywide cost containment initiative, Hallmark Cards Inc. this year has been able to realize 20 percent savings on its airfare spend and 5 to 7 percent savings on hotels each quarter.
Hallmark heavily scrutinized travel and decided to revise all aspects of the program--including policy, agency and preferred vendors--to save 10 percent of total travel costs by the end of 2000.
The company chose Sally Luck, manager of corporate services, to head the travel program. Before getting started, the travel team--composed of Luck and Andersen Consulting employees who were hired to assist with the companywide project--realized the importance of getting a handle on different cost drivers. To get an idea of an achievable cost- saving result, it benchmarked the current program against companies comparable in size.
"Determining what the actual costs are is not as easy as you might think," Luck said. "We had to break down city pairs: What did each segment cost us? What did average hotel nights and car rental surcharges cost? We figured that out and then had to try to figure out how to monitor it on an ongoing basis."
The cost containment initiative began in August 1997. By February 1998, the travel department had rolled out a new corporate policy that included the use of penalty fares wherever possible, but it gave travelers the ability to use frequent flyer miles, a privilege that previously had been denied. Under the new policy, travelers must take the best cost option or have their supervisor sign an exception report. The key difference is "the language is firmer. You have to go through the travel agency and are expected to use preferred suppliers," she said. Luck last August put the policy on the company's intranet.
Hallmark switched agencies in April 1998, from Maritz Travel Co. to Rosenbluth International. As part of the bid process, "We had to decide whether we wanted to go with a regional agency or a first-tier international agency," Luck said. The company decided to go out to bid because it was looking for an agency that could provide technology as well as demonstrate good industry relations and negotiating skills. Ultimately, the fact that Rosenbluth offered Dacoda, its decision-support software, made the difference. "No other agency was able to offer that," she said. It rolled out Dacoda in July 1998.
As part of Andersen's strategic sourcing process, Hallmark implemented a "cost model" with Rosenbluth, requiring the agency to report on monthly average airfares in each of the company's 180 city pairs as well as costs and compliance for car rental and hotels. "On airfare alone there is a four-page report that has total cost, segment volume and average cost per segment," Luck said. Hallmark has been able to realize 20 percent savings on airfares by tracking city-pair pricing and using an American Express index that tracks inflation and price increases.
For hotel tracking purposes, "We found the need to break costs into suburban, airport and city properties because there is so much variation in hotel rates." As part of its revised travel policy, the company established benchmarks for hotels to ensure that if a traveler wanted to stay in a property that cost more per room night than was allotted, he would have to receive approval beforehand. The ability to better track supplier usage led the company to renegotiate new air and car rental contracts last fall. On the airline side, "we actually dropped partners because we found we had more contracts than we were able to support," she noted. The company now is working with America West, TWA, United and US Airways. Though Hallmark went out to bid for car rental, it stuck with Hertz, its incumbent.
On the technology side, Hallmark last week kicked off a 30-day pilot of the online booking system @ Rosenbluth, with 100 travelers and 30 travel arrangers, and plans to have the system rolled out to 1,000 frequent travelers by year-end.
The only segment remaining before the travel program restructuring is complete is to consolidate meeting planning. The company wants to implement a corporatewide calendar of meetings that is centralized within the travel department to have a single point of contact for all aspects of meeting planning, including air and hotel arrangements. It plans to get that off the ground early next year.
Luck said the most important lesson learned by going through the strategic sourcing process was "really figuring out how to measure costs," and "finding a travel agency that is really willing to help you do that." She said it couldn't have happened without "support from the top. That was needed to set an example and show commitment toward making the tough calls in the spirit of containment.