For the past two years, First Data global strategic sourcing
director Pamela McTeer has "run a circle" on her company's travel
category management, moving through assessment, strategy development,
implementation and measurement before restarting the process.
Hired in 2010, the 30-year travel and meetings management
veteran has guided First Data's transformation from a decentralized travel
program to a global, strategically sourced procurement category.
"To understand the current state of our program, we had
to figure out where our baseline was," McTeer recently told a Business Travel News Corporate Travel 100 webinar audience. "We found that there was not a consistent
methodology for use of our booking tools and payment systems in any markets,
and not necessarily a complete alignment of our local and global travel
policies. Our biggest opportunity was in behavioral management. We focused on
that to put the right pieces in around the globe."
As the Atlanta-based payments processor expanded to more
than 34 countries, it adopted a decentralized approach to procurement—including
travel management, expense and payment. That began to change in 2009 when the
company hired new procurement executives, including chief procurement officer
and global strategic sourcing vice president Shawn Anderson, a former Delta Air
Lines executive, who outlined a new "global strategic sourcing
organization and brought in commodity experts in different categories, travel
being one of them," McTeer said.
The firm's travel policies and processes in the United
States, Europe/Middle East/Africa, Latin America and Asia/Pacific regions were "not
aligned from a booking-to-expense perspective," McTeer explained. "Cost-effective
methods for travel arrangements and use of preferred suppliers were not
consistently utilized." And, the company had many different types of
payment providers, with "no discounts or rebates in many countries."
While some had expense reporting systems, "several
entities" had "no systems supporting T&E detailed spend
visibility or alignment with policy compliance reporting," McTeer said. "Trying
to get visibility on spend was a challenge." That became a "conduit
for putting in a global travel program," and she began collecting data
from internal sources and suppliers.
Ready For
Globalization?
As part of her assessment, McTeer wanted to understand what
and why to globalize. "We needed to assess whether First Data was ready
for travel globalization because it was one of the first commodities to go that
route."
The analysis revealed that First Data "could benefit
from a consistent global service capability" and process standardization.
The first step was tweaking a global travel policy initially deployed in 2009
to better align it with a new travel mission statement that called for and "end-to-end
framework to control costs, deliver cost savings, provide travelers with
optimized and consistent service levels, effectively manage supplier
partnerships and meet the demands of the changing travel environment."
Ongoing Analysis
Strategy development and implementation relied heavily on
continuous strategic market analyses of travel subcategories: air, travel
management company, card, hotel, ground transportation and online booking.
First Data uses several tools, including a seven-step market assessment and
Porter's Five Forces of Competitive Position, to "make sure our strategy
still applies."
As part of each market analysis, McTeer establishes either a
"should cost" model or a "total" cost model. " 'Should'
is very difficult in the airline market with fuel costs and such," she
explained. "Not so much in hotels to get down to what you really should be
paying in this market for the facilities they offer and how you use that
property. Car rental is relatively easy.
"In true category management, it's something that is
constant, not something you do once and then look at next year to see if your
analysis was correct," McTeer continued. "There are so many things
that change in the industry."
For example, Southwest Airlines "certainly impacted"
the Atlanta market—already one of the biggest in the country—when it began
operations there. Concerned about leakage from its preferred carrier Delta,
First Data communicated to travelers and added messages to its online booking
tool.
"We have great leadership support. While not mandated,
it's certainly strongly suggested that you use our preferred suppliers."
The results were "amazing," McTeer said, noting virtually no
marketshare shift away from the preferred airline.
In the hotel category, the market assessment projected a 6
percent to 7 percent rate increase this year. FirstData achieved a 5 percent
cut. McTeer is convinced that the company's global program, which took hold in
2011, was the key.
"We really started pushing usage, communicating to the
key executives the value of booking and staying with our preferred hotels, and
we proved it," she said. "We delivered to suppliers."
As part of that process, First Data also drastically reduced
the number of preferred hotels in its program—from 27,000 worldwide when McTeer
joined the company to 400. To supplement those agreements, McTeer said she
works with some chains on quarterly dynamic pricing programs. "I only do
that in markets where it's not a key hotel for us," she noted. "That
works really well right now, except in places like London."
Market analyses and reporting on travel policy compliance
and other metrics are shared quarterly with senior management and more
frequently with others. Geographical breakouts, including the status of new
programs, are part of standard, eight-slide summaries presented to senior
management, said McTeer, who is assisted by a travel committee.
Biggest Opportunity: Behavioral
Management
"All of our reporting is based on policy compliance,"
McTeer explained. "I built the original case on the area I saw as the
biggest opportunity, putting a policy in place and compliance to it. I wanted
[management] to focus only on four to five key metrics that they could impact:
advance purchase, accepting lowest fare and using our online booking tool and
preferred suppliers—including the approved agency and credit card. Those
metrics were certainly things they could impact" by communicating with
their direct reports.
Reports detail year-over-year performance as well as goals
for each unit and metric. Goals are established based on market analysis and
other factors. McTeer said she benchmarks the company's metrics against others,
including BTN CT100 data, which
management readily accepted.
As part of a benchmarking case study McTeer presented to the
CT100 webinar audience, she compared First Data's preferred supplier compliance
inside and outside the United States to overall compliance reported by CT100
companies. While most of First Data's U.S. compliance rates for corporate card
(95 percent), car rental (95 percent), booking channel (83 percent online) and
airline (83 percent) met or exceeded CT100 averages, compliance for non-U.S.
travel was estimated in the single digits for all categories (excluding
Australia, which had 65 percent compliance for car rental and 40 percent for
online booking).
The analysis showed that "we did not have the right
agreements in place and needed to improve global travel policy compliance on
non-U.S. regions," McTeer said.
New Supplier
Agreements
To close the gap, McTeer began consolidating to one card,
one expense tool and fewer hotels, and took control of online booking
technology agreements. At press time, she was in the final stages of a TMC bid
process.
First Data needed a single global corporate card to garner
the data necessary to track travel spending. The card program is being rolled
out in a "phased approach through EMEA, the United States and Latin
America, focused on the largest volumes first," she said. "You've got
to look at the culture in those countries to make sure your credit card program
fits." The company's assessment found non-U.S. markets rely on a mixture
of business travel accounts, individual cards and even direct bill.
Finding a single payment solution to work in all cultures
and countries was "one of the hardest parts," McTeer said. To
accomplish the task, she partnered with accounts payable and audit "to
make sure they saw the benefits of the processes that we were putting in place
around the world."
The strategy also called for one expense reporting system
aligned globally with First Data's enterprise resource planning platform. The
company has implemented the expense reporting technology in key markets, but "it's
not completed yet," McTeer said. "Accounts payable would love to have
it in place around the globe, but that takes time, resources and programming,
so you phase in."
While McTeer isn't responsible for expense or audit, she
said both functions are key to collecting travel program data and tracking
metrics, and partnerships with accounts payable and other treasury positions
are critical.
As part of the bid process for a travel management company,
First Data also recently assumed control over two online booking contracts that
had been held by its current travel management company. The company has an 86
percent online adoption rate on applicable travel in the United States and 24
percent in the United Kingdom (both markets use a Rearden Commerce booking
tool) and 70 percent in Australia (where Concur's booking took is deployed).
In the RFP, McTeer said she asked bidders to quantify the "ROI
of a TMC. It's amazing the responses I'm getting." She explained that CPO
Anderson asked her that question, and she immediately replied with the typical
TMC value proposition. "He said, 'No, I want one number.'
"It came down to me realizing that the ROI of a TMC is
almost the same as that of an administrative assistant," she said. "When
you're doing your own sourcing and analytics, you're basically asking the TMC
to process data and transactions."
To monitor performance, "normalized data across global
travel markets is critical," said McTeer. She tries to "capture what
you can leverage," keep metrics simple, include data requirements in
preferred agreements, "embrace continuous data improvement, define savings
and avoidance and implement KPIs."
The ROI of the program thus far is "double-digit cost
savings year over year and cost avoidance as well," she said. "We
have more visibility to what we are spending and more visibility to our
travelers." Compliance to two key indicators has improved, but travel has
new targets: 86 percent of traveler transactions accept the lowest fare offered
and 70 percent are made at least 14 days in advance. The program now includes
16 countries accounting for 85 percent of total spending.
At various steps in the ongoing category management cycle,
McTeer said she "reflects on the objectives and mission statement"
for First Data's travel program. "I'm a 30-plus-year travel veteran who
has become a strategic sourcing person in the last seven years. I really love
the focus of strategic sourcing in the travel arena: it used to be feared, now
it's revered."
Sidebar: Tenets Of Strategic Market Analysis
These seven tenets of strategic market analysis, developed
by Censeo Consulting Group and adapted to travel by First Data, outline the
steps to develop a complete picture of the travel category, including the
deliverables to be included in a category assessment:
1. Use many diverse market data sources to develop an
accurate, unbiased view of the category. Deliverable:
Document research sources such as Wall Street analyst reports, 10-K or annual
financial reports, research providers such as Gartner, AMR Research, Dataquest,
Forrester, industry publications, industry associations and general Internet
research.
2. Identify which suppliers have the capabilities to meet
your needs. Deliverable: Use business
requirements from a seven-step sourcing process, in collaboration with your
stakeholders (management or a travel committee) to document the alignment of
current suppliers' ability to meet your needs.
3. Create a clear and insightful picture of the market
related to size, growth, share, competition and market-specific dynamics. Deliverable: Document global spend in
the market, its anticipated growth over the next three-to-five years, up and
coming competitors and specific dynamics that could impact the commodity.
4. Understand the overall economics of your suppliers'
market, including profitability, cost structure and related drivers. Deliverable: "Should cost"
model or "Total cost" model.
5. Identify key trends that could influence the future
market, such as competition, technology, pricing and mergers or acquisitions. Deliverable: Trends report on category
for a three-to-five year period, indicating strengths, weaknesses, political
and economic impacts and innovation.
6. Identify how different suppliers compete and the level of
competitive intensity. Deliverable:
Identify negotiation strategies and unique attributes of top competitors.
7. Summarize market analysis into clear and concise
implications with supporting rationale for strategic decision-making. Deliverable: Summarize discoveries, your
market position in category and how the market analysis supports category
strategy.
Sources: First Data
and Censeo Consulting Group
This report
originally appeared in the May 2012 issue of Travel Procurement.