Tomes have been written on how technology has streamlined and improved existing supply management processes — from ordering paper clips via a Web-based catalog to sourcing complex assemblies via highly competitive online negotiation methods with suppliers from all corners of the globe.

Yet, little ink has been shed on the real value technology will bring to purchasing and supply management. As noted in posts here on Supply Management 2.0, the real benefit of technology is its ability to enable advanced analytical scenarios and entirely new business processes that derive new sources of value for both buyers and suppliers.

KLM Royal Dutch Airlines is one company that is using technology to drive innovative new supply management practices. The world’s largest airline company is no stranger to technology-enabled supply chain approaches. According to a new article in Travel Procurement Magazine, in the past six years, KLM has used a common e-sourcing tool to “source everything from aircraft seats and temporary staffing to plastics and flight crew uniforms.”

Yet, the most compelling part of the article focuses on how KLM has used e-sourcing to overhaul its approach for sourcing hotel accommodations for its crew, staff, and distressed passengers.

Like most companies, KLM negotiates annual contracts with its hotel providers. However, Dolf Mesland, KLM’s corporate procurement and fleet manager, says contract rates act as ceiling prices: “They are the maximum amount we would pay.”

KLM’s contracted hotels use the e-sourcing tool to update their rates daily based on room availability and market conditions. According to the article, “Hotel personnel log in [to the e-sourcing tool] as many as eight times a day, entering rate quotes and availability information and seeing how their offers compare with those unidentified competitors.”

This innovative sourcing process ensures that KLM gets the best room rate at a given location on any given day. Rates in the annual hotel contracts protect KLM from overpaying or blowing its budget for a give room. And hotels benefit from being able to ensure that their rooms are fully occupied. Consider it load balancing for the hospitality industry.

The article reports that KLM conducts 700 such hotel e-sourcing events annually, purchasing nearly 7,000 rooms per month through this channel.

Says Mesland: “This is far more efficient for our staff and for our hotels. No one has to make calls. It’s all quite clear as to what happens. In the past, it wasn’t transparent at all; now it is transparent for all.”

Read the full article here. Or, better yet, learn more about KLM’s innovative sourcing methods first hand at Empower 2007. To register or get more information on KLM and the nearly 50 other enterprises presenting supply and contract management best practices at the conference.