Procurement professionals usually spend as much time analyzing and evaluating markets to develop strategy for a pending initiative as they do negotiating and contracting. At Freescale Semiconductor, global travel/general procurement manager Julie Thomte didn't have the luxury of time.
Freescale needed a travel management program within six months of Thomte's appointment in the second quarter of 2005--not just a policy, but a travel management company, online booking tools and preferred supplier agreements with airlines, hundreds of hotels, car rental companies and other suppliers to support 23,000 employees in 31 countries. Spun off from Motorola, Freescale had until Jan. 2006 to establish its own travel contracts.
What some might have viewed as an impossible mission, Thomte considered a rare opportunity to develop a program with a clean slate. Within weeks of the successful rollout, Thomte was asked to perform similar magic on the newly independent company's procurement of other business services: advertising, marketing, corporate communications, public relations, consulting, human resources and business services for finance and legal. She took over purchasing of more than $550 million worth of goods and services, including about $65 million in travel and entertainment.
[PROFILE_1]A year later, Thomte continues to manage all the "emotional areas" of Freescale's procurement as one of eight purchasing professionals reporting to chief procurement officer Tom Linton. In addition to costs, Thomte must consider employee emotions to travel, healthcare benefits and even advertising procurement decisions, she explained. But Thomte has taken anything but an emotional approach to procurement. Applying procurement practices honed as the North America and later global travel manager at Dell Computer--"the Harvard" of business training--and elsewhere during her 20-year travel career, Thomte systematically collected and dissected data, grasped the emerging culture, learned executives' views and developed the strategic plan to guide the new Freescale at warp speed.
"It was like driving a bus at 80 miles per hour while you're trying to change the tire," Thomte said. "All of these things were happening at once," but all had to be in place by year-end 2005 to allow Freescale to leverage its buying power.
[PULL_1]Thomte knew what she needed to do to establish preferred supplier relationships. The challenge was identifying Freescale's spending within the larger footprint of former parent company Motorola. "I gathered all the data that I could internally from finance, and externally working with the travel management companies that Motorola was using to carve out Freescale's data," said Thomte. The data was "highly embedded," so identifying the number of transactions from each country--critical elements necessary for agencies to bid on the business--was challenging at best. "Although I had a high level of spend by region, I didn't have the granularity of transactions," she explained. Air spend was estimated at about $22 million.
"We had to go from an assumption that our footprint was similar," Thomte said. "Then, we had to come up with the sourcing strategy for air, car and hotel." At the same time, Thomte began meeting with the CEO, CFO and other top executives in Freescale's regions to better understand culture and relationships. "The culture was not used to change. RFPs had not been done in a long time," she noted.
Articulating one-year and two-year plans, and putting a process around the rigor of RFPs and sourcing strategies, Thomte quickly elicited support from a small, but growing global procurement team in Europe, Asia, Brazil and Mexico. At the same time, she worked with Freescale's information technology department to develop human resource feeds for online booking and travel agency systems, once those contracts were finalized.
Six agencies bid on the business. Thomte considered sourcing the agency business to no more than three regional vendors, and in the end, Freescale single-sourced to Carlson Wagonlit Travel for service in 31 countries. For close to two decades, travelers had used another agency, Thomte said, "so that was a large change for the culture." For continuity, and due to time constraints, Thomte initially mirrored the travel policy and GetThere online booking deployment in the United States and Canada, to which travelers were accustomed, based on their experience with the former parent. Elsewhere in the world, travelers book via phone and e-mail.
Freescale also solicited more than 600 hotels, but found that the "company wasn't a well known name. We really had to have our team educate suppliers," to convince them to respond. In the end, Freescale negotiated rates with 250 hotels and eight airlines.
Global implementation and training ran from Dec. 1 to Dec. 15, 2005, across 31 countries. Freescale relied on Web training, but Thomte also traveled to Europe and Asia to train more than 700 travelers as part of the rollout. In addition to contracts and employee communications, Carlson Wagonlit Travel had to familiarize itself with the company's culture and policy. "The implementation was as close to flawless as I've ever seen. All the people involved just did a stellar job," Thomte said.
Weeks after implementation, and following the hiring of Freescale's first chief procurement officer, Thomte was asked to expand her role in procurement. "They basically said, 'You did an outstanding job implementing our travel program. You are a great addition to Freescale and we want to provide you with an opportunity to broaden your scope,' " Thomte said. "The general procurement area is primarily business services. Travel is also a business service."
"The core competencies of the procurement process are the integral part. The learning curve came from understanding the core drivers, nuances and cost models--answers to such questions as 'What drives prescription benefit costs?' and 'What are the opportunities in each area?' One of the first things that I did, in addition to meeting senior business leaders and all their staff, was to summarize all the contracts and suppliers to have an understanding of where we had opportunities to consolidate. Where we had been doing business for a long time without rebidding, there were opportunities."
Managing across all the spending categories, Thomte said, "There are a lot of similarities in terms of harnessing technology, strategic sourcing with executive level relationships and trying to have world-class supplier networks with demanding partnerships."
From a party of one, Thomte now has a procurement team of 11. Three are focused on travel in the United States, while one of three team members in Europe and another in Asia each devote a portion of time to travel. The rest are assigned to the other general procurement categories. In 2006, Thomte spent considerable time aligning the team and spending categories based on expertise.
For each spending category, the team looks for areas where it can implement "additional rigor and discipline" related to sourcing strategies, RFPs and contracts. The procurement team generates more reports on travel than other categories, but has developed spend/savings trackers for each spending category. Monthly, they review the spending in each category as well as the progress on reaching savings goals. Working with business units, the procurement team develops "pipelines to determine what our commitment is to the business on savings and a roadmap that shows the projects that will drive those savings."
While travel contracts "were well positioned, the bigger challenge was containing costs internally," which were growing in 2006, Thomte said.
Quickly, she rewrote the policy after benchmarking against 35 companies in sectors including pharmaceutical and high tech. Through benchmarking, and interviewing 15 travel managers, Thomte made sure that the cost drivers in the policy-advance purchase and approval processes-were in alignment with objectives. She also analyzed Freescale's data against the benchmarking to identify savings opportunities. For example, higher-cost international trips were rising at a rapid rate, driving up total spending. As a result, the company now requires senior vice president-level approval of all international trips across the water.
Immediately after implementing the travel program, Freescale audited for policy and contract compliance. It collected reams of data.
Armed with two quarters' worth of information, Thomte presented a comprehensive business review and analysis to senior management that included average cost per room night, self-booking adoption, average air ticket price, T&E as a percentage of operating expense and cost as a percentage of revenue. She also presented details on the drivers of spending increases and costs per unit, compared the costs to forecast and reviewed whether costs were rising at the same rate as revenues. The point was to review factors that Freescale could control--through policy, supplier choice or contracts.
Freescale is now developing an RFP for a global self-booking tool. "We have to approach it with a global mindset as we have global collaboration around the globe," Thomte said. The early stages of this development include gathering requirements from Freescale's regional offices in Asia, Europe and Mexico. Other goals this year are broader distribution of reports across the company, and measuring compliance to all policies.
Today, "my biggest challenge is bandwidth," Thomte said. "My time is 100 percent taken up everyday" trying to monitor progress and identify new opportunities to contain costs across all the spending categories.