OP-ED: Buyers Beware Of Strategic Sourcing

<B> OP-ED: Buyers Beware Of Strategic Sourcing</B>

By Ralph D. Brown

<i>Ralph D. Brown is president of R.D. Brown Co., a travel management consulting firm headquartered in South Elgin, Ill.</i>

<hr><b><center><FONT COLOR="#2D6E33">Click here to respond to the following editorial on the BTNOnline Bulletin Board

<hr></b></center>Over the last two years we have seen more and more instances where big consulting firms are dabbling in travel management. The new product offered by these "mega" firms uses the buzz phrase "strategic sourcing." But from what

we see so far, the apparent primary strategy is to make money for the consulting firm.

Here's what happens. The consulting firm packages a service that promises to restructure all areas of a company's supplier selection, with great savings to the company. The areas include any function known to have a supplier or contract. The consulting firm offers a unique approach for supplier selection that is far superior to anything currently done by the employees managing that area. A senior partner for the large consulting firm makes a pitch to the CEO of the corporation projecting millions of dollars in savings.

The problem is this. The consulting firm turns over every contract within the company, including travel related contracts that already have been negotiated and in most cases are working very well for the client. The consultant, however, promises that this new strategy and selection process is so rigorous that it will save far more than the travel manager was able to accomplish.

We have run into three instances in the last year where a mega consulting firm has completely revamped travel supplier relationships that were working well. Suppliers were forced to complete a lengthy RFP process with many meetings and hours of work. In one instance, a travel agency bid was completed even though it had been done only eight months before. The travel managers involved were forced to cooperate with the consultant and provide assistance where needed even though they had done an excellent job in supplier negotiations.

As a consultant for 15 years, I have certainly completed my fair share of bid projects. However, it is rarely necessary to competitively bid everything (air, agency, hotel, car, charge card) just to go through the process.

Travel is an area that is rather unique and requires understanding. It is an area where the culture of a company dictates what can be done with suppliers to a great extent. Going for the lowest price is not always the best approach. Practically any company can save 20 percent to 30 percent off its travel budget, but at what cost to the traveler?

When you're working with a consultant who lacks the expertise in a particular area, the solutions tend to be the obvious ones and are quite generic. As a travel manager, make sure that less obvious alternatives are fully considered. An inexperienced consultant may recommend policy language that in no way reflects the true culture of the company but would, if enforced, provide huge savings.

Travel managers forced to endure this process should make sure to participate aggressively on any supplier selection committee; keep senior management apprised of recommended changes that do not fit with cultural style; be outspoken in adding your knowledge to the process; and consider hiring a consultant who specializes in travel to assure additional knowledge is dispensed to the mega consultant.

As a travel manager, you may be hesitant to speak out when the CEO has chosen the consulting firm. However, you have experience on your side, and you can influence decisions with sound reasoning within the selection committee. As a last resort, be patient. When all is said and done, you will likely only have to deal with these consultants once.