With more than $14 billion in annual revenue, more than 60,000 employees and an array of products used every day, from car-door handles to soda-can six-pack plastic rings, Illinois Tool Works may be that largest manufacturing company you've never heard of.
More commonly known as ITW, the conglomerate has established an operational culture of decentralization, a strategy that enables the 750 or so companies that comprise ITW to customize their approaches to their respective markets and one that ITW considers key to its success.
Such an emphasis on entrepreneurism and locally derived strategy among its companies may lead to better customer service and higher profits, but it's not necessarily the most cost-effective model for a managed travel program. Allowing each ITW company to select its own travel vendors and negotiate its own contracts would lead to a dense thicket of procedures and policies, not to mention a failure to obtain millions of dollars in cost efficiencies that would be available by consolidating at least some volume.
Instead, the conglomerate under ITW director of global travel and expense management services Cathy Sharpe has chosen a different path that respects the corporate culture of decentralization while ensuring visibility of actual traveler spending and booking habits at the same time that it consolidates that data for the purpose of negotiations. The structure of the managed travel program, underpinned by the use of a single corporate card, online booking tool, travel management company and expense system, has enabled ITW to sign better contracts and avoid millions of dollars in spending while allowing the leadership of individual companies the policy flexibility necessary for their bottom lines.
"Every dime counts," Sharpe said. "If we don't connect all these small dots, we cannot have a program with the leverage and respect that this program deserves."
Finding Data
When Sharpe joined ITW about 10 years ago, the more-than-a-century-old conglomerate used multiple travel management companies throughout the world, and allowed its companies to opt into the corporate travel program. Sharpe, noting the potential leverage offered by combining the volume of its companies, said she joined ITW on the condition that she could globalize its travel program.
"I started right away working on that and found out right away that I had absolutely no data," she said. "There was no linkage from any kind of back-end systems whatsoever."
Exploring potential technological solutions to her lack of travel expense data—"all of our businesses were filing paper expense reports," she said—Sharpe spoke with Concur, fresh off its 2006 purchase of the online booking system provider Outtask, and was persuaded by the company's vision of a linked booking and expense system. ITW's management agreed to deploy the system at its Glenview, Ill.-based headquarters—which houses only a fraction of ITW's total employees—to assess its merits before rolling it out anywhere else.
It was a success, she said, enabling ITW to see exactly what headquarters employees were spending, and so the company began to make the Concur platform available to other ITW companies in the United States—which were still, at this point, able to choose whether to opt into the program.
Targeting some of the largest U.S. companies with a pitch that included the ability to leverage spend, simplify accounting procedures and develop scorecards, companies began to join the program. "Once I got them to buy into it, they served as a testimonial for the rest of the company," Sharpe said. "Now, we've gotten to the other side of the curve, where the units that aren't on our program yet are asking to be."
Globalizing The Effort
Meanwhile, ITW conducted a request for proposals for global travel management company services, soliciting bids from each of the world's largest multinational TMCs, Sharpe said. The company chose American Express, which also provides ITW's corporate card globally.
With success in the United States, ITW, which has operations in 62 global markets, began to push the program to some of its largest countries in Europe. Adoption has continued since, and ITW recently opened a travel center in Barcelona to help service those travelers.
"We decided to take a leap of faith and try out a hub solution," Sharpe said. "We just decided that it would not be prudent for us to manage 50-plus local programs for travel. Because the thing about ITW is, there's a $100 million company here, a $30 million company there, and a $2 billion company over here. It's just a bunch of small companies all over the place, separate companies with different names that make many different things. It would take us another 20 years if we were doing local setups in every country."
The effort to globalize was aided by a recent policy change that requires ITW companies to avail themselves of the travel program if it is available in their country. "So, if you're in China and Concur Expense is in China, your business unit must use Concur Expense," Sharpe said.
That's not a hypothetical, as China is one of the most recent countries in which Concur Expense has been deployed. This quarter, ITW companies in China will be required to use American Express Global Business Travel for bookings.
"The reason I put Concur Expense there before I put travel there was that I wanted to see what are they doing and see what spend was there," she said. "We can see now, are they actually booking travel through American Express and if they're not, why aren't they, and we're measuring that and reporting that back on all levels of the organization."
ITW corporate culture highlights an 80/20 rule, in which 80 percent of attention and activities should be directed to the top 20 percent of what will deliver the highest margins. However successful the concept has been for other aspects of ITW's business management, it's not one that lends itself well to a global travel management rollout.
"With travel, 80/20 just does not work," Sharpe said "That's something that I had to try to teach the organization as well, because they were like, ‘We'll just put 80 regions on. Just our big regions, the U.S., the U.K., China and forget about the couple of business units that we have in Africa or the three units we have in Argentina.' But for me, safety and security and every dime counts."
Reaping The Benefits
Deploying Concur's expense solution throughout the world has not only offered ITW insight into its companies' actual expenditure data as well as spending patterns, it's enabled a stronger hand in negotiations and the ability to pare preferred-vendor lists.
"In the United States, we see every expense that's incurred and I think that 90 percent of the expenses are going through our corporate card, and the high 80s [percent] go through our preferred vendors. We have been able to consolidate down our vendor list from, my gosh, when I started working on the ITW account they had 32 or 33 airline contracts. Now we have carved that down to a couple of alliances, and at least 80 percent of our expense is going through those two alliances. We're very proud of that."
ITW does have an umbrella travel policy, but management at individual companies can grant exceptions based on business needs. To help them understand employee travel patterns, Sharpe's team, a five-person department housed within ITW's strategic sourcing operations, on a quarterly basis delivers scorecards based on Concur and American Express data. The scorecards include figures concerning "overall spend, budget, online booking versus off-line booking on the card and off the card, use of our preferred vendors, and then any kind of loss or savings pertaining to not using our contracts and booking out of policy. So if they're not booking the lowest fare, we're showing those metrics to them as well."
Sharpe said ITW has consolidated to date about $160 million in annual global travel spending; she estimated the total figure to be at least $200 million. Determining the extent of that volume, and the global deployment of the expense management tool that made such a determination possible, has made possible all ITW's moves to more cost-effectively manage its travel spending while respecting the strategy of decentralization, she said.
"It's been a game-changer," Sharpe said. "It's allowing us to have complete control of our data. I'm not saying that Concur's not selling it. I'm sure they are, but I don't really care about that. At this point in time, all I care is that I can get my hands on what I need in order to do my job and in order to put the right information in my leadership's hands so that they can manage the business as well as possible."
This report originally appeared in the February 2015 edition of Travel Procurement.