In the asset management world, there's small, there's midsize and there's huge. According to chief procurement officer Joanna Martinez, AllianceBernstein is in the middle. Sure, the company's global travel and entertainment volume exceeds a not-so-modest $50 million. Yes, AllianceBernstein is the seventh-largest asset management company, according to Yahoo Finance. "But the six ahead of us are ahead by a lot," Martinez said with a laugh during an interview in the midtown Manhattan headquarters building that bears the AllianceBernstein name.
Though it is no slouch in terms of purchasing power, this market positioning helps AllianceBernstein cultivate and maintain a realistic sense of itself and its relationships with suppliers. A Martinez mantra of "winning at strategic sourcing even when you are not a big player" guides the use of procurement tools for travel buying and promotes the AllianceBernstein culture of appreciating quality service and overall value, rather than simply price.
Implementing a procurement toolkit that includes close examination of their company's relationship with travel suppliers, Martinez and her team have created a program in which bigger is not necessarily better, areas with little leverage are not sacrificed and online travel purchasing is blended with high-touch service.
Supported by senior executives, notably the firm's CFO and COO, the approach has saved money, improved service and won fans among a savvy traveling population.
[PROFILE_1] Gathering The Right Tools
Since taking over the company's travel program in late 2003, Martinez said her team built a kit "based on the analytical tools that worked in our prior lives in consumer products and pharmaceutical procurement ... and what didn't work. We found that most spend in financial services responded to the toolkit. The techniques for analyzing commodities are sound, and they work just as well for indirect spend--such as travel and selling, and general and administrative expenses--as they do for direct spend, such as raw materials and chemicals."
One of the key tools, which prompted change in the company's travel management operation, is the supplier perspective analysis. Used for all sourcing projects at AllianceBernstein, the matrix examines "how we perceive the supplier views the attractiveness of our business" by comparing the attractiveness of the account (based on supplier actions) with its relative financial value to the supplier. It determines where the account fits on a "key" versus "nuisance" scale, and, when used in conjunction with the other tools, drove AllianceBernstein to select a new travel management company and a different travel management configuration.
"When we examined our needs, we effectively decided we needed a bimodal approach" with online self-service and manual telephone support, said Martinez. "We had a lot of straight big-city to big-city pairs, like New York to San Francisco, so that related very well to an online booking tool. But we also had very complex global trips, where someone might be gone for three weeks and has [multiple] visa requirements. We had a mega agency, and we were using an offsite service in the metropolitan New York area, but we weren't getting the service performance or attention we needed. It wasn't as low cost as it would be with an online booking tool and not as high-touch for complex travel. While that works for lots of businesses, it wasn't going to work for us."
With the mega agency, AllianceBernstein had not been using a self-service reservation tool. Seeking "automation on one side and high touch on the other," as well as a local connection, AllianceBernstein in late 2004 chose Manhattan-based Ultramar Travel following a competitive sourcing process.
"Our U.S. business is largely based in the New York area," said Martinez. "We care about where [the agency is] located, so that a travel agent dealing with the complicated, high-touch travel can be close enough to be able to come in for a periodic review. That face to face across the table helps with service, allowing agents and travelers to develop a relationship based on a deeper understanding of the traveler's needs."
[PULL_1]The company now enjoys what Martinez called "marquee status" with Ultramar, earned partly through a supplier relationship management approach that nurtures collaboration and being a "customer of choice." Considerable time is spent educating agents about AllianceBernstein. The firm also holds an annual travel fair including various suppliers, but its most popular table is the one at which travelers and agents "get to meet face to face," said strategic sourcing vice president John Cornetta. "In three years, we have heard many more compliments than complaints regarding the service experience with Ultramar."
"We really rely on the travel service provider as an extension of our staff," said Martinez. "This is beyond the notion of a call center approach. They are virtual members of the AllianceBernstein team, but we don't try to do their jobs for them. We have received comments about other companies where the travel managers call 50 times a day, almost trying to do the agents' jobs for them."
AllianceBernstein celebrates the anniversary of the start of the Ultramar relationship at an annual luncheon with the agents. "High touch goes both ways," said Martinez. Building such credibility with the vendor isn't just touchy-feely, Martinez noted: "It resulted in us getting better service and pricing."
Common Goals Produce Results
Aligned in their goals, AllianceBernstein and Ultramar are making the "bimodal" self-service-plus-high-touch model work. Ultramar teaches agents that their jobs are not at risk because of online booking, so they support its use. The client's self-service adoption of Concur's Cliqbook is running at about 40 percent of eligible bookings, which Cornetta said is about 90 percent of AllianceBernstein's total volume.
AllianceBernstein determined it has saved roughly 52 percent off per-ticket transaction costs despite the "higher-cost salary area" in New York.
"Is it $10 per ticket?" Martinez asked rhetorically. "No, but we think it's fair for the level of service we get. They are educated travel service professionals. They know how many airports there are in Milan and that you can't travel outside the country with a passport that's going to expire within six months. They have a better sense of the little nuances."
Meanwhile, the proverbial "visual guilt"--in which travelers booking on their own are more likely to buy a lower-priced service than when speaking to an agent--has saved "just shy of $200,000," said Martinez.
Having worked previously with onsites and call centers, Cornetta supported the use of a local--but offsite--provider because "you get the level of attention you need, and you also reduce the noise agents have to experience because they are offsite."
On balance, AllianceBernstein's travelers are affluent and comfortable with technology, but Ultramar agents are empowered to guide them to follow company policy. Travel manager Claudia Hurtado and Cornetta "constantly remind agents we're there for them in terms of supporting policy--for example, requiring the standard [room] versus the suite," said Cornetta. "The agent has to have that conversation: 'In light of economic times,' etc. We use the COO as a point of reference. He knows travel is difficult and isn't looking to be unfair, but he leads by example. He's helped push the online booking tool as part of our travel program."
The company enjoys 68 percent utilization of preferred hotels, although that figure would be in the "upper 90s," Cornetta said, if it excluded authorized nonpreferred hotel bookings, such as those for conference attendees.
The company's most frequent travelers are surveyed twice a year, and "We have watched our approval rating soar into the high 90s at the same time we watched our cost numbers come down," said Martinez.
Negotiating Tactics May Vary, But All Spend Is Leveraged
In addition to benchmarking, client satisfaction and supplier preferencing analysis tools, spend rationalization and portfolio analysis play big parts in AllianceBernstein's air travel and lodging relationships. For all commodities, matching up buying power against market complexity directs the type of negotiating approach to use. Where it has leverage, the company "might use an e-auction to negotiate hard," said Martinez. In low-spend but high-demand areas, relationships are key and obtaining value-added services may be the goal.
"Our toolkit might tell us that on certain air routes, like New York-London, we have great leverage, which leads you to one approach," Martinez said. "In hotels, we're not a big player, and it's a different situation with supply and demand, so that requires a different approach. We developed commodity strategies, like in the beverage or packaging industries, knowing it's not a 'one size fits all' and keeping in mind the market complexity."
[PULL_2]In lodging, "there is a narrow band of hotels we want to stay in based on quality and proximity to our offices. As a function of our demand in that market, we may not have as much leverage, so we need to establish relationships and look for more services," said Martinez.
As she builds relationships with properties, Hurtado continues the strategic orientation toward client attractiveness and value to the supplier. If it can be established through a relationship, she is often able to negotiate an "improved value proposition" by including such services as executive club memberships--which is particularly important if rate discounts are small or not offered at all.
Hurtado recently has focused on "improving last room availability," she said. "Key to these relationships is making sure travelers can get our rate in top markets."
"Both communities need to recognize that it's not only the price that makes up the cost," said Cornetta. Preferred airline contracts, meanwhile, "run the gamut" in terms of structure and scope, he added.
Whether for lodging or air travel, both Hurtado and Cornetta balked at the "low-hanging fruit" notion that buyers should focus only where they get the greatest benefit. "We don't want to settle," said Cornetta. According to Hurtado, "You should leverage all your spend."
Seeking every opportunity, AllianceBernstein also leverages the buying power of majority-owner Axa Financial. "We do direct contracts in most cases," said Martinez. "But Axa owns more than 60 percent of our company and, as a result, we may partner with them if the arrangement is in our best interest. In some cases, it makes sense for us to work together, but not in all cases, because our policies and travel patterns are different."
The two companies' patterns "fit very well" with domestic airlines, for example. They can leverage commonalities for hotel chains as well, Hurtado said. International expansion and meetings consolidation may generate more cooperation with Axa, the AllianceBernstein buyers said.
Travel As Part Of Procurement
Martinez credits the sourcing toolkit--which her four-year-old sourcing group built based on past experience in other industries--for AllianceBernstein's "great" results in travel, "despite not being a huge company."
Martinez spends about one-third of her time on travel, she said. "That's because we spend a lot of time looking at policies and growing globally. We have put sourcing managers in Hong Kong and the United Kingdom, and we're in the early stages of building travel management programs internationally." The company also has begun swapping large travel management companies in places like Brazil and Singapore for Ultramar's local GlobalStar partners.
As CPO, Martinez manages "all spend," organizing her team by both spend category and region: Cornetta's technology and travel teams, print/fulfillment, administrative services/operations, supplier management and regional leads for Asia-Pacific and Europe, Middle East and Africa. The firm's overall spend exceeds $1 billion.
"You can apply sourcing toolkits to what seem to be very different areas of spend," Martinez said. "Many supply characteristics for market data services, for example, are similar to hotels in travel spend."
"Laptops are a commodity and price-focused," said Cornetta. "Hotels and TMCs are more relationship-focused. Coming into the travel space from a procurement background, you have to be multifaceted, recognizing the skills and tools that would work best for the situation you're in."
AllianceBernstein's SUPPLIER PERSPECTIVE ANALYSIS "How we perceive the supplier views the attractiveness of our business."