We kicked off the list last week with a recap of Pat Furey’s advice for sourcing Direct Materials in a time of skyrocketing commodity prices. So what’s next on our Category Managers’ list of current categories that provide sourcing opportunities? Travel Management.

No surprise that high fuel prices and a weak US$ are hitting companies hard when it comes to their travel expenses. In fact companies have seen increases in airfares, hotel rates, and the IRS mileage adjustment. And anyone who’s traveled abroad lately knows that after doing the exchange rate math, a sandwich practically looks like a fine dining splurge on your expense report.

It’s in this context that Justin Falgione, a Senior Category Manager for Services, outlined the steps companies should take to minimize the impact of rising costs on Travel & Expenses spend, all while maintaining a system that meets the needs of users.

Justin’s recommended strategy looks at travel costs holistically, rather than attacking individual variables. For example, simply rolling out a new online booking tool doesn’t mean the costs savings will start rolling in. Instead, program design, contract terms & pricing, online tools, and reimbursement should be considered together, since the success of each is reliant on the other components.

The ‘holistic’ theme ran through many of Justin’s recommendations, such as:

• Process improvement - Tightening up the approval process and integrating it with online booking tools to drive savings will yield greater compliance, thus giving you more T&E spend under management … and greater leverage with providers.
• Understand the airline business - Look at all the variables in your users’ travel - from the percentage who could utilize low-cost carriers to reach their destinations to how often late booking is required - before negotiating.
• TCO of hotel stays - It’s no good to save on the room rate and wind up getting whacked by high-speed internet, parking, breakfast and airport shuttle fees.
• Rental cars - Hang on to existing pricing as long as possible. And when it comes time to renegotiate, factor the city surcharges into the total cost calculations.

The reality is, travel costs won’t be going down anytime soon. And until we’re all working in the theoretical home offices of the future (paperless places with where all meetings are conducted online, right?), squeezing the value out of every T&E dollar spent is a huge opportunity for cost savings.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback, please email Justin at jfogarty[at]ariba.com.

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