Schlumberger Consolidates Agencies Globally

There can be few businesses that have transformed their travel programs as radically as the oil, gas and information technology company Schlumberger. In 1999, its oilfield services division used 278 different travel agencies in the United States alone. Today, it has come close to reducing to just two travel management companies worldwide.

Even more remarkable are the contracts driving these relationships. The fee earned by the travel management companies is adjusted according to three criteria: In each country, Schlumberger pays the TMC a fee to cover the cost of servicing the account, with an additional small transaction fee for overheads and profit. If the cost of servicing the account comes in below budget, then the difference is shared between client and TMC. However, the figure is adjusted according to the approval rating from travelers and bookers measured in customer satisfaction surveys. If, for instance, the TMC is entitled to $100 in savings and has registered an approval rating of 89 percent, the figure is adjusted down to $89. Finally, the TMC is subject to random low-fare audits. If this exercise reveals that the TMC has not been offering the lowest logical fares available, then the TMC has to pay for the audit.

"We are putting up risk and reward parameters for the three measurements relevant to travel management," said Schlumberger global travel manager Neil Hammond. "Anything else that does not impact one of those three parameters is not relevant. For instance, unless making travelers use e-tickets brings our costs down, what is the point in doing it?"

A detailed obligation to provide high-quality management information also is included in TMC contracts. Another innovation is intended to solve the age-old conflict between centralized control and local autonomy. Hammond has drawn up a short-list of TMCs that all national markets must use. Within that constraint, each market is free to choose whichever TMC it wants from that list.

Although he is British, Hammond has spent most of his 17-year career with Schlumberger in the United States, in such departments as purchasing, product planning and inventory management. At the end of 1998, he transferred to the newly formed strategic sourcing department, where he assumed U.S. travel buying responsibilities for the oilfield service division that accounts for two-thirds of the company's activities. By 2001, Hammond was travel manager for all divisions in North America and South America and he moved to corporate headquarters in Paris to take the global position in 2002.

Working on the principle that establishing a TMC relationship is "the first building block you have to put in place for a managed travel program," Hammond in 2002 set about streamlining Schlumberger's multiple agency relationships. In Europe, these almost were entirely unconsolidated outside of the United Kingdom, France and Norway. However, Hammond already had tackled the 278 U.S. agencies by this stage, learning valuable lessons in the process of reducing to just one: WorldTravel BTI. "Making the selection was easy, but then came 18 months of difficult times," he said. "Our people had difficulty adjusting to the change of culture: not being able to choose their own agent and having to use call centers instead of a more personalized service."

Taking action in the United States was an urgent necessity. Hammond estimated that Schlumberger was missing an opportunity to cut $15 million from its annual $50 million U.S. travel expenditure, partly through not having strong airline deals but also because agents were not passing on any revenue from airlines. "Some individuals were making strong six-figure incomes from us." Hammond also was aware of some use of illegal ticketing by smaller agencies, which would have prevented him from tying up managed agreements with carriers.

Hammond hit on a strategy of selecting three TMCs—American Express, Business Travel International and TQ3 Travel Solutions—that he felt could offer adequate service in the 30 or so countries where Schlumberger has a significant presence. Each country was allowed to decide which of the trio it preferred. As things stand today, Amex serves Schlumberger in 13 countries, representing 33 percent of the company's estimated worldwide spend of $300 million. BTI represents 61 percent of that spend, or 13 countries, and the specialized marine crew travel business. Of the remainder, 4 percent (comprising Australia, New Zealand, Oman and India) have not been consolidated, and TQ3 handled two countries, worth 2 percent. That leaves Amex and BTI handling all but 6 percent of the global business, both having to adhere to the contracted metrics that govern their remuneration.

Hammond also specified in the TMC contracts that his data must be in "excruciating detail." It reflects the immense importance he attaches to high-quality information for negotiating the best possible deals with airlines and other suppliers.

Hammond has started building a data warehouse supplied by travel technology company TRX. At present, it holds information on $110 million of T&E spend, but Hammond has been disappointed by most of the management information he receives from TMC offices around the world. "The data from the U.S. is outstanding, but it is pitiful everywhere else," he said. Nevertheless, Hammond has accumulated data he considers good enough to issue requests for proposals to airlines. He presently is evaluating the carriers' responses. Various deals are in place, but Schlumberger is not yet exerting global leverage. Hammond particularly is keen to wave the prospect of long-haul business as a carrot to airlines in return for their giving better deals on short-haul routes. Hammond realizes he will have to be highly directive to travelers to deliver on deals, but he has strong support from senior management and also is cracking down on potential policy evasion through improving the company's expense management processes. Travelers in North America are using GE MasterCard, while Amex has won a contract to provide cards for travelers in the rest of the world.

Hammond is seeking to introduce an automated expense management tool, and to find a single online booking product to use in conjunction with multiple global distribution systems and TMCs that also provides access to products not distributed via GDSs, such as low-cost carriers and rail. The latter especially is important in France, where it accounts for more bookings than air. Hammond said the corporate booking tools have not yet evolved sufficiently to meet all of these requirements. "I can see them on the horizon, but I don't know how far away the horizon is," he said.

Also on his wish list are finalizing the global airline relationships he has started to negotiate and furthering consolidation of TMC service to between four and six regional call centers worldwide. These, he said, bring economies of scale and help streamline travel management, such as monitoring policy compliance. Work already has started on a single center for Norway, Sweden and Denmark. Schlumberger also is seeking to combine France with Belgium, plus a center for the Middle East region.

Hammond is determined to complete his strategy as fast as he can to unlock the savings he knows Schlumberger can achieve. "There will be no sleep," he said, "until we get there."