Taking a different approach to travel management, some companies are managing not just the cost, but also the demand for travel. "Demand management" advocates advance strategies to convince employees to rethink how and why they travel, and to consider alternatives if they must.
Management consulting firm A.T. Kearney studied the benefits of demand management on typical corporate services, such as real estate, facilities, IT and marketing. Applied to the categories of travel, temporary labor and office supplies, the study found, demand management could deliver savings of 15 percent or more, versus returns of just 5 percent in other categories.
The consultancy defined the strategy as "systematic influence and oversight of factors that drive the quantity, specification and frequency of purchases made by an organization."
In practice, such companies as Bristol-Myers Squibb, Hewlett-Packard and Vodafone have found that demand management as part of a travel procurement strategy delivered not only cost savings, but also faster product development plans and reduced "wear and tear on employees" and carbon emissions, according to speakers at an Association of Corporate Travel Executives conference in Munich.
While it has used demand management during the past six years to help it manage the $1 billion in annual travel expenditures of 150,000 travelers, Hewlett-Packard "got top management interested in this" during the past year, said global travel and meeting services manager Jykri Haavisto. "Now we have formal methods for measuring savings, and we're seeing savings."
Savings aren't only in costs, Haavisto said. "We're seeing the ability, for the first time, to develop products without team members seeing one another." Without travel, teams developed products in a shorter time frame. "Ways to help us avoid travel and costs are great, but there are more important advantages too," Haavisto said. "That's what really got senior management excited."
Cost savings were definitely a reason Bristol-Myers Squibb added the approach three or four years ago, but so too were sustainability and a desire to "change people's behavior," said Philippe Darson, director of corporate travel services for the pharmaceutical's Europe, Middle East and Africa and Asia-Pacific regions. "Strategic sourcing was doing well, but year after year spending kept going up" as travelers continued to repeat past practices, he explained.[PULL_1]"BMS flew 374 million air miles in 2005, which represented 66,000 metric tons of CO2, a 23 percent increase over the previous year," Darson said. BMS "installed videoconferencing facilities in 23 countries, created awareness and encouraged use [of videoconferencing] to reduce travel," he added. The efforts resulted in a reduction of several million air miles flown, as well as an additional reduction in auto miles driven. Demand management initiatives also included policy changes to require travel to be booked at least two weeks in advance and encourage use of three-star instead of four-star hotels. To promote its videoconferencing facilities, BMS integrated the option into its online booking tool.
Vodafone emphasized less "wear and tear" on travelers, reduced carbon emissions, as well as cost savings in promoting its 200 videoconferencing units and six lounges. "Demand management existed within Vodafone for several years," but only in travel after corporate services global commercial manager Tracey Williamson joined the team two years ago, she said. A marketing campaign included CEO support, posters and chocolates for employees, as well as incentives for the travel agency to "push videoconferencing," she said.
Vodafone reduced travel between cities where it established videoconferencing lounges, "reduced expenses and saw ROI on equipment in just over two months," she said. "This has resulted in significant spend reduction in one of our largest categories.
"Executive support is a must; it must be seen as coming from the top and communication is key," Williamson added about demand management initiatives. Marketing efforts also had to convince travelers that the experience would be better than the "bad experience" most had with videoconferencing equipment five or six years earlier. Vodafone challenged reasons to travel, she noted, adding that the travel team asked employees who booked trips, "Why can't you do this by videoconference?"
Rearden Commerce vice president of travel services Tony D'Astolfo said demand management could be a viable way for large corporations to supplement strategic sourcing, negotiations and other components of travel procurement. Summarizing the A.T. Kearney study, he said the "three pillars of demand management" are a "structured approach, rigorous analytics and accountability and change management. If you're going to use demand management, don't just throw it out there for a one-off approach," or think you can try it as a short-term solution to reduce costs for one quarter.