What do travel managers, who already run a tight program, do when their company asks them to dig deeper for even greater savings? It is a question many buyers have faced in the past 18 months as budgets have been slashed worldwide. In the case of Ericsson, travel policy had been largely economy class-only for some years and director of corporate travel management Brigitte Ringdahl had many excellent supplier deals in place. Nevertheless, she and her core travel team revisited their program at the beginning of 2001 and since then have pulled even more savings out of the bag.
They reduced their budget in two ways: First, by encouraging cost-avoidance through less travel, which resulted in the number of air miles flown by Ericsson employees declining 39 percent in 2001. True, Ericsson has reduced its workforce during that time, but the number of trips per employee also has fallen. In Ireland, where there were no cuts in personnel, the total number of trips fell by 2,000, to 7,000 last year.
The other solution was cost-reduction. Ericsson's home country is Sweden, where the average ticketed fare benchmarked against full fare fell a further 6 percent to 7 percent in 2001. This was achieved both through negotiating better deals with airlines and educating travelers to book smarter, such as switching from full fare to discount economy tickets.
Ericsson started to tighten budgets last year as the mobile telecommunications sector slowed down after half a decade of dizzying growth. Retrenchment shifted the emphasis from sales growth to cost containment and the company set itself a goal of SKr20 billion (US$2.2 billion) in savings in 2001, followed by another SKr10 billion (US$1.1 billion) this year. Ringdahl's team was not given a specific target to hit, but had to play its part to support the budget holders who were responsible for making reductions.
As has often proved the case, cost cutting took the team back to first principles and the question of whether employees should be traveling at all. Ericsson staff has had access to tele- and videoconferencing for several years, but until last year take-up was relatively poor. That was changed through overhauling the virtual conference booking process by putting it on the Microsoft Outlook system and providing employees with a Web-based guide to the facilities available.
The travel department also led by example. When conducting airline negotiations on behalf of 23 countries last October, Ringdahl and a small number of colleagues met the carriers face to face, but several more Ericsson personnel participated through teleconferencing. Those involved by telephone took part only in the sessions relevant to the countries for which they had responsibility for travel. Sessions lasted 90 minutes to three hours, and Ringdahl said the blend of colleagues attending in person and by telephone was a success. "For us in the travel group, it was very important because we had to walk the talk," she said.
Another approach to eliminating trips has been to restrict the number of managers who can approve travel requests. In the United Kingdom, for instance, only eight people have that responsibility. Tom King, Ericsson U.K. travel and fleet procurement manager, insisted that the system works well. "Travelers use electronic approval forms, which makes the process more efficient," he said. "There have been no incidents yet of travelers complaining about non-availability of people to give them approval." Travelers also can book their tickets first and then seek approval, giving them more opportunity to buy discounted advance purchase tickets, most of which are either 75 percent or 100 percent refundable.
The Ericsson travel team does not believe the company has suffered through traveling less. Instead, the review of travel showed there was more fat to be cut than originally was realized. "We have been stricter about internal meetings," said Ireland & U.K. travel manager Claire Jones. "How many employees do you need to attend the same conference, seminar or workshop? However, one thing we have not done is neglect travel to see customers."
Where employees have gone ahead with trips, the travel team has instigated numerous measures to keep costs down. One has been a major drive to persuade travelers to use public transport instead of taxis. Examples include switching to the new Arlanda Express rail service from Stockholm's main airport and the city center bus transfer from Dublin airport, which sets down just a few hundred yards from Ericsson's Irish headquarters.
Process management also has tightened up. There are additional control mechanisms, such as policy exception reports, and Ericsson also is starting to feel the benefit of a corporate card deal it signed in 1996. It took a few years for enough travelers to start using the card to build up comprehensive management information for dealings with airlines. That paid dividends in last year's negotiations, which Ericsson conducted on a city-pair basis. Eighty percent are upfront net fares. Ringdahl and her team based their strategy on signing at least two airlines for each key city pair. Previously, there had been only one preferred carrier for each region. As well as a discount, they also were seeking benefits usually given only to business class passengers, such as waivers on Saturday night restrictions, plus lounge access and preferred checkin.
"We contracted with a minimum of two carriers to introduce an element of competition, so if one supplier increased its prices, the problem would solve itself," Ringdahl said. "In any case, we found one carrier could not always guarantee all the seats we wanted. They resisted us in the beginning, but they didn't want to lose our business."
In return for making them share routes, Ringdahl provided evidence of Ericsson's loyalty by negotiating only with airlines with which it had existing deals. The carriers were well rewarded. Policy compliance by Ericsson travelers on routes where it has a deal is 85 percent.
Compliance with the company's two preferred car rental suppliers is even higher, at 90 percent. Where there still is work to do, as with many companies, is the accommodation sector, where compliance remains lower than 50 percent. Ringdahl said this is partly owing to certain hotels popular with Ericsson travelers moving to chains where no commercial relationship exists. Other reasons are lack of comprehensive management information and not spending as much time educating travelers about accommodation as about air.
The travel team has launched a sustained campaign to address these issues, including accelerating the rollout and usage of a Swedish online reservations program. Adoption rates are rising in Sweden and the system now has been introduced in Ireland and the United Kingdom. The online hotel guide carries Ericsson's preferred rates at 1,100 hotels in 260 cities.
Looking ahead, Ringdahl is aiming to spread the good work achieved in the Europe, Middle East and Africa regions to other parts of the world: She is busily setting up travel management teams in the Americas and Asia/Pacific.