Global travel management company contract negotiations can
challenge any company, especially large conglomerates comprised of independent
businesses that own their own profits and losses. Such is the case for U.S.
technology and equipment manufacturing conglomerate United Technologies Corp.,
which oversees hundreds of entities in dozens of lines of business.
Snapshot
Organization: U.S. technology and equipment
manufacturing conglomerate United Technologies Corp. with more than 300 legal
entities in over 30 countries in Europe, the Middle East and Africa alone
Challenge: Migrate from a
global/regional/local program united by third parties—two multinational and
three local travel management companies and a corporate card system—to a global
structure that consolidates information to help drive negotiations while
allowing necessary localized customization
Approach: Work with an
independent consulting firm to put out an RFP for a global TMC and to gather
data from candidates and negotiate a contract with an internal team of
purchasing, finance and HR executives
Solution: Select a TMC in
the coming weeks and implement by year-end a program with a single expense
system, a global TMC contract that reserves the right for local exceptions, a
reporting tool that ties them together and, if needed to supplement, a
third-party data aggregator
UTC's internal corporate environment provides a complicated
setting in which to manage and procure multinational travel services. For
example, Katharina Spittel, UTC EMEA commodity manager for travel, manages more
than 300 local legal entities in more than 30 European, Middle Eastern and African
countries. Without a standard enterprise resource planning, human resources or
expense technology system, the company relies on its TMC and corporate card
systems to maintain local relationships and tie the global businesses together.
"The TMC and card are key for me to make sure I connect everyone into the
program," Spittel said.
While UTC intends eventually to roll out a global HR system,
she said, a shared corporate services structure is more than four years away.
Two multinational and three local TMCs help UTC operate a
global, regional and local program structure. Several years ago, it had
selected a global TMC, but a second provider joined the program two years ago, after
a UTC acquisition. Local TMCs joined because of exceptions UTC granted for
extenuating service. Spittel works with regional counterparts at the TMCs and
at UTC's card provider to tie the program together, and the TMCs provide a
single point of contact per country.
Other resources that support UTC's travel program include
the procurement organization, within which Spittel holds regional responsibilities
and communicates with local purchasing counterparts; human resources, which
maintains employee profile data; and finance, which is involved with the card
program.
The Search For A New System
Spittel worked with an independent consulting firm to put
out an RFP for a new global TMC contract and collect data from nine TMC
providers. She and a team of purchasing, finance and HR executives this spring
internally will select a TMC and negotiate a contract and implement it by
year-end. Each exec will communicate the decision to his or her regional
business unit and local entities.
In addition, Spittel said, the company is putting together
reporting and dashboard tools that bring together TMC and card data "because
with not having an expense management system right now, I don't know what the
gap is sometimes in spend differentials."
Instead of a single expense system, the company has multiple
expense processes. Spittel has been working with UTC's finance department to
dig up data regarding the company's biggest locations: "what their overall
T&E spend is today, how many reports they're running and what system they're
using." She said, "for 75 percent of my entities, it's a purely
homegrown, Excel-based solution today, so there is no system. We're looking into
a solution that would be a central system."
Similarly, UTC is looking at TMCs' limited ability to
deliver global service. "There are some markets where we've made local
exceptions because we just see a local provider being closer to our local
requirements," Spittel said. "We'll continue to have that option, and
in any future TMC contracts, we'll reserve the right to have some exceptions in
local markets. What we're trying to do, as well, in the current TMC bid is to
put a capability matrix in place country by country. I've done it on card
already. We're doing the same thing now with TMC to see which markets have totally
owned operations, where there is standardization in data collection. It's
important to have transparency on the limitations … so we can continue
monitoring them and find either interim solutions to bridge the gap or look
into defining a more long-term solution."
If, via the RFP, Spittel finds that the TMC system for data
management is insufficient, she may select a third-party data aggregator that
can deliver "more real-time, clean and actionable information because that
really is something that my internal stakeholders expect from the program,"
she said. "The time of TMCs just booking travel is long gone. We now need
to show additional value from the program."
She also is working with UTC's card provider, which she
declined to identify, to develop a more central and standardized system to
enable internal card-program administrators to reach out with questions. "Just
one person is not sufficient sometimes, particularly when it comes to issues
with local language in countries, such as France, where local language is very
important." she said. "We're trying to rethink the support models
right now."
Along with the TMC bid, Spittel also is looking at UTC's
global distribution system relationships. Because her efforts to understand
underlying cash flows during the TMC bidding process were not entirely
successful, "we're still not having a fully open-book conversation,"
she said, "but we have reached out first through the TMCs to the biggest
GDSs and from our side as well to understand what kind of financial benefits we
can get back and what kind of technology or reporting or insight we can get
back through that relationship. These discussions have been very interesting,
and it's something that we're definitely looking at more closely."
In conducting the TMC selection process, UTC decided early
on to separate consulting from other TMC services. With only four people managing
the travel program, UTC needs additional consulting resources to source global
travel services effectively. Part of the rationale for separating the two in
the selection process is to examine the services offered as part of the
standard TMC package.
Calculating Changes
Another critical part of the process was Spittel's effort to
calculate the total cost of ownership. She not only sought to understand the
point-of-sale fees and the fixed costs presented in the different offers but
also worked with her colleagues to factor in each one's internal cost of
change, "the most difficult number to find, because everybody knows it's
there but nobody can really find the right calculation and number to put
against it. We did end up agreeing on something because we wanted to put
something there."
She said the cost of change is "significant, because
all of our profiles today are stored with the TMC and in most cases on the
respective online booking tool. Something that would certainly make us a lot
more flexible in the future RFP would be a third-party-profile solution. That's
another thing that, apart from the reporting tool, in the long term we'll need
to look at."
Also critical to this effort has been communicating plans to
and gathering input from key stakeholders and local business unit leads.
"What you need to find are the metrics to consolidate
globally and … still leave enough flexibility for the local market to want to
be in the program," Spittel said, noting that she seeks "an approach
that's as modular as possible but has on the top of it the overall
consolidation of information so that we can drive our negotiations and our
supplier relationships but that is open enough on the bottom to plug and play
with local solutions that fit for our local requirements."
Spittel sees the TMC as UTC's most effective path to global
integration. "We need the TMC to be our extended hand in managing local
markets," she said, "and that's why that relationship is key to us
today."
This report originally appeared in the May 2015 issue of Travel Procurement.