John Guarneri
Vastly expanding its remote conferencing capabilities last year, Philips International installed telepresence technology in 23 sites around the world and is planning to expand that to more than 35, according to global supply market manager for travel and vice president M. John Guarneri. Speaking at The Masters Program in Washington, D.C. last month, Guarneri said his travel procurement group worked closely with the information technology department to identify which locations would satisfy the most demand for collaboration, and also to analyze return on investment in terms of travel avoidance. The company chopped internal travel by half, including a tremendous drop in trips to and from headquarters, Guarneri said as he answered several questions about procurement's role in travel management, including those that follow.
Did you apply videoconferencing totally to internal meetings or did you apply it to client-facing and other opportunities?
Face-to-face internal meetings. Travel to customers was not stopped. What we try to look at and what we try to determine is the relationship between travel spend and sales, because we are getting the push saying, "what is my return on this investment for travel if I am going to customers? What percent of sales should I be spending as far as travel?" Now in some cases it is sort of--last I heard in some of the businesses that we are in--1.8 to 2 percent. I am forewarning management, "Don't be alarmed if travel spend goes up if your sales are going up; be concerned if the travel spend is going up and your sales aren't."
At this point, you have 23 facilities and you have seen a good return; is there an eye toward expanding that network or is it all you need?
We actually are expanding the network to 13 more sites but we are putting in what we are calling a light version. If you are familiar with the Halo system, you have three screens and the rooms are identical so you can almost shake the other person's hand or pass a Coke between screens. With the light version you only have one screen in a room, so you don't need that big build up, special air conditioning and all that. At least it facilitates that communication and we are really looking forward now to tying in with other companies and using their facilities and vice-versa.
How do you handle pre-trip authorization?
We had pre-trip authorization about three or four years ago, and then in the beginning of 2009 the tone of the company changed a little bit--in essence saying that we kind of trust our travelers and they know what they are doing and what they shouldn't do. But we still like to keep our fingers on international travelers, so anyone who is traveling internationally needs pre-trip authorization.
Have you adjusted your metrics [in light of the economic situation]?
Being a part of procurement and doing all the market studies, we saw that there was a change happening in the later part of 2008. Procurement is looking at fuel, transportation, the price of copper … they are looking at GDP growth, unemployment. Come February 2009, we got a call to order--not only my supply market being travel, but all the other markets got the call to order in the sense that we brought all our top vendors in and said, "We are seeing some trends over here. The economy is going this way, we want to renegotiate contracts and we want to do it right now." We did that not only in Europe, [but also] we did another program in the United States for the U.S. vendors and we did it over in Asia-Pacific. We lowered the prices that we were receiving on hotels, cars--we looked at everything, and we had to document everything that we were doing. I don't know if we would have reacted that fast within travel [if it was] not part of procurement.
How do you measure return on investment?
This has been one of my sticking points. How do you measure your savingsand who validates the savings? It's trying to get [procurement] to understand how travel operates. Sometimes I don't have control over the market. Say my airline deal is predicated upon a percent discount off a booking class. If that class goes up, even though I may have a 40 percent discount, I'm still going to be paying more. I may have done a good job in negotiating a 40 percent deal but because the market went up, I didn't bring any savings. Cost avoidance is nice, but it's not bringing P&L savings.