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  • Business Travel News Supplier DirectorySUPPLIER DIRECTORY

Siemens Gets Car And Airline Vendors To Do Its Bidding

By David Meyer / August 17, 2010 / Contact Reporter
Business Travel News on X

Siemens, the multinational conglomerate, made real strides in car rental and airline purchasing in the past year through the use of electronic-bidding tools.

E-bidding is one of three areas, along with savings and supplier rationalization, that Siemens is using this year to measure travel program performance after a reorganization driven by a supply chain management initiative brought the purchasing organization out of shared services and put it under a central corporate structure. The new setup facilitates greater strategy alignment and global development.

"To kick off our new supply chain management initiative, we started with a true global car rental tender last November using an internal tool," said Siemens director of mobility services Steven Schoen. Use of such a tool was new for his organization and for many of his vendors. "The process of setting up a global bid with regional and local requirements entailed of lot of preparation, coordination and organization, and was fascinating to watch," he said "The final bid period was a 15-minute timeframe. Halfway through, there were no bids, but I said, 'We still have seven minutes to go. Just watch the screen.' After 13 minutes, it started to light up. Two minutes later, we shut it down."

Schoen noted that there are many different types of e-auctions, so it's not a term that can be used generically. While some companies have used such auctions only for the price component, Siemens and many others also build in service requirements. For some electronic auctions, he said, "everything is in the system, and the system spits out the winner. We still wanted to have some latitude based on local requirements."

Schoen said that the global car rental bid in the end didn't really change the North American program too much because "we already had a single vendor in that market, and the incumbent was aggressively determined to retain our business." The company's "goal was to have a consistent and more effective global strategy in this space, not necessarily to end up with a single provider globally."

Use of a different e-bidding tool for airline purchasing, however, was focused on the 300 top citypairs for domestic U.S., Canadian and transborder flights.

"It was very interesting how the airlines reacted to that," Schoen said. "Some of them were argumentative about this process. Our response was, 'If it's against your business philosophy, don't participate.' Some of them said, 'We don't do business this way.' We said, 'We've been doing business your way all along. We call this buyer yield management with the goal of creating more of a balance in this process.' "

In the end, all but one airline participated, Schoen said. "We projected a number of scenarios about how this might play out because one of our goals is to further rationalize our airline supplier base."

Schoen described the Siemens e-bidding process as having a front, middle and back end. At the beginning, he lays out Siemens' terms and conditions, not including price, for the bidding procedure. "If they don't want to sign onto that on the front end, they don't even get to the bid process," he said. "The rules of engagement are standard terms and conditions up front."

He said there were two rounds of bidding. "When we finished the first round, we went back to each of the bidders and showed where they needed to improve. They had the opportunity to do a second round and on then we analyzed how the results impact our strategy and savings.

Regarding the airline auction, Schoen, said that the company is currently analyzing how the air awards "impact the system deals we have in place. There were some surprises as to how the different airlines responded to the opportunities in the different markets."

Despite the downturn, Schoen said Siemens still issues approximately 850 tickets a day in North America, and its top 300 citypairs are only about 42 percent of its air volume in the region. "That's why we have to pay such close attention to our system programs and won't forsake them all," he said. Initially, the travel team only planned to bid out the company's top 100 domestic U.S. citypairs, but an internal group working with them asked, "Why stop there?" Schoen said that group "even recommended that in this round we do our top international citypairs, but that's where the global strategy kicks in, so if and when we do that, we'll do it on a global level. The transatlantic piece is very large and significant for us in both directions, so we wouldn't want to do that as a stand-alone regional bid."

While many other companies have looked at using an electronic bidding process to source airlines, most don't have the clout to get the airlines to participate. For those that can, however, the process can clearly change the way buyers and airlines interact.

"The nice thing about electronic bidding," Schoen said, "is that you get away from the personal relationship part of it and look at it more objectively—almost like an outsider looking in. We were very satisfied by how this process worked out."

This story originally appeared in the August 9, 2010, edition of Business Travel News.

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