Diagnosed with an outdated travel management program, WellPoint Inc. this year developed and implemented the treatment. The health benefits company reconstructed its travel policy, replaced both its travel management company and online booking system, and obtained ARC Corporate Travel Department accreditation. New preferred supplier agreements, a travel portal and social media are among other phases completed this year, with reviews of WellPoint's payment and meetings programs underway.
According to strategic sourcing travel manager Cindy Heston, the goals are to build policy, technology and services that support preferred supplier contracts and corporate objectives and, most importantly, to design a program that delivers value to the company's 10,000-plus travelers.
"Value has to be there. Travelers here are very savvy," Heston said. "They are definitely looking for best cost." While "our objective in procurement is to go out and negotiate the best price, if you forget about value, security and consistency of the program, I don't think you're going to be successful."
Spotting The Symptoms
Hired in July 2008 to "improve our cost positioning," chief procurement officer Anthony Santiago quickly recognized opportunities across several procurement categories, including travel and meetings. "I didn't think we were using procurement to achieve maximum savings," he said. As a result of "health care reform, the economic slowdown and attempts to improve profitability, the company focused more resources on procurement."
[PROFILE_1]Santiago said it didn't take long for employees to suggest that he inspect the travel program and online booking technology. "Travelers didn't feel like they got the best rates," he said, acknowledging that this happens everywhere. "But many of the complaints our travelers had were legitimate. When I started looking at travel, it was clear we didn't have the right contracts in place with service level agreements and even more clear that we didn't have the kind of professionals we needed to run this. That's when we started looking to find someone like Cindy."
Recruited in December 2008 from Indianapolis neighbor Thomson, Heston said, "We determined early on that everything in travel--from the agency to booking tool to hotels--had to be reviewed." Most travel contracts were last bid more than thee years prior, some more than five, she added.
The company's travel policy needed updates, not the least of which was a transformation from guidelines or recommendations to mandated processes.
Heston worked with WellPoint's "policy compliance board," which manages more than 70 policies, to ensure that the policy and platform would support the new travel initiatives. For example, Heston said, until the online booking system and TMC were in place to support airline contracts, it made little sense to encourage use of specific airlines. "Now we're going to be very strategic in our placement of airline contracts because we have the policies and technology to support the contracts and ensure that we meet our objectives in terms of share obligations and contract requirements."
That's also why travel policy verbiage changes were necessary. Instead of recommending or suggesting use of a vendor or booking tool, the policy mandates compliance. "It really changed the focus to 'This is the policy; you must use our preferred vendors,' " said Heston. No class-of-service changes were made. Except on some international flights, WellPoint's policy is coach, even for executives, according to the publicly traded company's financial filings.
WellPoint in May 2009 told travelers of the new policy, effective June 15. Various communications and webinars detailed the changes. "It may have been the change of a single word," Heston said, "but it changed the way travel is managed at WellPoint."
Choosing Preferred Suppliers
The travel strategic sourcing group developed requests for proposals for both a travel management company and online booking tool, and in March issued them in tandem.
Based on booking volumes and percentage of corporate travel, Heston devised a bid list of 10 mega and regional TMCs. She then called each bid prospect to explain three key initiatives and determine whether they wanted to continue: WellPoint wanted CTD status, a direct relationship with the global distribution system and to launch the booking tool at the same time as the TMC. "We looked at the three criteria as must-haves," Heston said. Of 10 prospective bidders, seven bid on the business.[PULL_1]
To assist with the TMC bid, a committee of management and business unit employees surveyed all references cited by the contenders. "It was all very qualitative, so we weren't guessing. We had defined information" from each reference about their TMC's service delivery.
For the booking technology, Heston said, a committee included information technology and "administrative assistants who were the top bookers." This group tested each of three booking tools under consideration and completed a structured survey after live demos. "We wanted very formalized information" on issues of importance to them, Heston said. "One of the larger issues was content. They were very interested in ensuring that all of the content, whether it was air, car, hotel or Amtrak, would be contained within the tool or could be managed through that one connection." Speed, ease of use and the ability to manage multiple travelers were other top concerns.
In one demonstration, the booking tool vendor turned on every feature within the system, "overwhelming" the testers. The demo "did not fare well in the responses."
The ability of all the tools to handle nonrefundable ticket re-use--a hot button for WellPoint--garnered "positive feedback from the committee. They were very impressed."
"I definitely wanted something that at the point of sale would highlight, market, reference or preference specific supplier information to assist travelers with their decision-making process, almost like a virtual agent," Heston said. For example, she wanted the ability to display to travelers value-adds negotiated in preferred agreements, particularly with hotels and airlines.
WellPoint in July awarded both the TMC and online booking contracts to Travelocity Business. Two teams--one in Dallas and another in San Antonio--are dedicated to the account. "A lot of my peers really didn't understand that you could still have a dedicated team, account management, site management all specialized toward your company. That's one of the misnomers out there about Internet travel agencies. It definitely is [available]; it's just what you negotiate in your contract," Heston said.
Meanwhile, Heston's team in late spring began a review of preferred hotel contracts, which at the time covered more than 300 properties in key destinations. As market conditions eroded, Heston renegotiated and extended through 2010 contracts with about 100 preferred properties. The company limited the number of hotels to just three or four per city. Savings and consistent service for travelers were among the objectives.
WellPoint's new contract required Travelocity Business to "ensure our contracted prices are utilized." If a preferred hotel is booked at a rate higher than WellPoint's negotiated rate, Heston expects the agency to stop the transaction, research the problem and fix it. The agency automated that process, Heston said. "What they have developed is remarkable." Whenever a traveler views a preferred hotel rate higher than contracted, she said, Tbiz forwards the page to her. "Initially, I only wanted to see such warnings when an actual booking was made. It finally hit me that what they mapped is better, as I can see traveler behavior," Heston said. For example, she can easily identify when travelers aren't booking a particular hotel because the negotiated rate isn't properly displayed. "What we're developing for 2010 will not only display that to me, but also to our national chain sales manager and the local property sales manager so they can take action immediately."[PULL_2]
WellPoint also issued an RFP for a new corporate payment card and is looking at "a more holistic solution," incorporating travel and purchasing card and expense reporting across its businesses. It currently uses a homegrown expense reporting product that doesn't take card data feeds.
Rolling It Out
Amid agency implementation planning, WellPoint in September received its appointment as a CTD. "We have chosen to outsource all functions, including weekly ARC reporting, to Travelocity Business," Heston said. The CTD "just gives us a certain level of consistency and independence that is important."
Implementation planning began in earnest in mid-July. Procurement worked closely with corporate communications and WellPoint's "Finance University" training and registration group on a messaging plan and training. In October, "we had 41 live training sessions, of which 20 to 25 were in person" for more than 3,000 employees, Heston said. The team hit the road Mondays through Wednesdays with four to five training sessions each day and held interactive Web meetings each Thursday and Friday. In addition, it offered Web training and static presentations.
After each session, team members Michelle Cocchiaro and Sharon Horsley surveyed participants to learn what else they wanted to know about the booking tool or process. "We developed our November and December schedule to ensure they all understand not only the basics," but also the shortcuts and more advanced features of the tool, Heston said.
The new agency and booking tool officially launched Oct. 19. Within two weeks, Heston said, post-booking surveys tracked positive remarks from 90 percent of respondents, with online booking compliance at 93 percent of all transactions.
While encouraging travelers to offer feedback, Heston's team, in conjunction with WellPoint Web designer Sal Mendez, developed new social media tools to collect, distribute, manage and use such information. "Social media is going to be my saving grace," Heston said. "We have a great number of travelers with really good information to share. Unfortunately, emails to me or other members of my team come in as disparate information that's difficult to consolidate. I cannot manage that tactical information in an organized way to use it effectively." She is optimistic that the new tools will provide the means to collect and put the ideas into action.
Metrics That Matter
Though most initiatives are only months old, the new preferred supplier agreements and booking tool have generated savings, Heston and Santiago said. The company improved use of nonrefundable tickets by 40 percent this year with an initiative that launched in February, Heston noted. Additionally, once use of preferred properties was mandated, she saw a "25 percent improvement" in transactions booked with some preferreds. "We didn't just renegotiate with hotels; we changed the dynamic of how we use and support them through our policy," she said.
Heston had to develop saving methodologies and gain buy-in from business unit owners and the corporate finance director on how to calculate them. Initially, she worked with an analyst and bounced ideas back and forth on the best way to calculate a savings metric. Once the two deemed the calculation "bulletproof," the finance director reviewed the metrics. "Everything presented thus far has been validated and already posted to Tony's savings," Heston said.
"Like most procurement groups, we're focused on savings, but we're looking at a number of items on our balanced scorecard that talk to employee development and growth, education, customer satisfaction and our interaction with suppliers," Santiago said. "We're getting ready to roll out a new scorecard that has a bit more balanced view of what we measure," such as the associate experience, the selection of suppliers and service. "That's not to say we haven't seen some huge improvement in savings. We've pretty much tripled our savings in 2009 versus 2008, because we're getting traction in a number of areas. There are still opportunities."
Santiago expects to be able to "evaluate the agency," and identify the true cost of travel and compliance with preferred suppliers. He also anticipates increased use of the preferred booking channel and improved service for travelers. While the accomplishments thus far are "huge, we will now look at the meetings area to determine how to have a more unified approach and capture more of the purchasing synergies," he said.
How To Manage Meetings
Under the new policy, all contracts for meetings of 20 or more people must be reviewed by procurement before they are signed. In the first month, Heston received about 40 contracts to review. Ten full-time planners, along with numerous part-time planners, continue to source the meetings. Increasingly, planners are proactively asking travel procurement for help earlier in the sourcing process. "We already had a really good view on the commercial side because it was managed by professionals throughout our organization. But the new policy really helped us understand how many meetings throughout the business were managed more independently," Heston said. Reviewing contracts is helping Heston understand meeting trends. With anywhere from one to five days to review a contract, Heston said, "there's not a lot of room to go back and negotiate with alternative suppliers, but it's enough time to at least ensure the best interests of WellPoint."
The new policy also helped travel procurement identify incidents in which planners needlessly signed contracts with preferred hotels for 20 or 30 sleeping rooms for meetings held in company offices. Planners now have been informed not to sign a contract in such cases. "It's really shifted the mindset throughout the business," Heston said. "And the more the value is proven with the larger events, we are gaining a stronger internal reputation and being brought in earlier in the process, which is ultimately the standard we will be designing for 2010."