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Procurement and Travel Management Company Financial Modeling

2. Topics To Be Covered. Procurement strategyPurchasing's roleBrief history of agency/corporate pricingAgency pricing models. 3. Topics To Be Covered. TMC procurement strategies for 2005Traditional modelsOnline agenciesOnline service/support/financial modelsPerformance Service Level Agreeme

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Procurement and Travel Management Company Financial Modeling

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    1. Procurement and Travel Management Company Financial Modeling

    2. 2 Topics To Be Covered Procurement strategy Purchasing’s role Brief history of agency/corporate pricing Agency pricing models

    3. 3 Topics To Be Covered TMC procurement strategies for 2005 Traditional models Online agencies Online service/support/financial models Performance – Service Level Agreements

    5. 5 Planning For Success Enlist senior executive sponsorship Rigorous assessment of current travel program and supplier support Define requirements

    6. Define Requirements

    7. 7 Purchasing’s Role To Fear Or Not To Fear Do relationships with suppliers change when purchasing is involved? Does purchasing actually control the negotiations, and if so who actually is the process owner? Is travel really that different?

    8. 8 Travel Manager Strengths Travel economics and pricing Best practices Understand use of travel technologies Supplier strengths and weaknesses Performance Traveler needs

    9. 9 Purchasing’s Role Balance between procurement principles and the unique attributes of travel

    10. 10 Purchasing’s Strengths Understand the business goals and objectives Leverage strategic sourcing best practices Leveraging technology to increase efficiency and reduce processing cycle-times “Good guy bad guy strategy” Contract management and compliance

    11. 11 Sourcing Initiatives – Agency It is not just about securing the lowest price!

    12. 12 Sourcing Initiatives – Agency It is not just about securing the lowest price! However…..price is very important

    13. 13 Sourcing Initiatives – Agency

    14. 14 TMC Sourcing Understanding the landscape Traditional Online agencies Operational configuration Financial models RFP process Performance measurements

    15. 15 TMC Sourcing Process Organize cross functional team Train team Get data Determine requirements RFP – questions and weighting Distribute Evaluate – rank

    16. 16 TMC Sourcing Process Select finalists Presentations Evaluations of presentations Due diligence Best and finals Negotiate agreement Award

    17. 17 Financial Models Commissions retained or returned? Bundled or unbundled? In a bid situation, request financials in various formats

    18. 18 Example Client of ours with air volume of $7M Commission differential between retained and returned was $6.50

    19. 19 Travel Management Co. Negotiations How should volume affect pricing?

    20. 20 New Strategy Guaranteed Savings

    21. 21 Online Booking Financial Considerations Touchless Lite Touch Full Touch System Cost Note: Financial models can affect adoption levels

    22. 22 Online Booking Financial Considerations Touchless fee = $10 Full touch = $20 Assume 90% touchless I would suggest negotiating an $11 blended rate.

    23. 23 Online Booking Other Costs Implementation Ongoing maintenance costs Internal IT resource costs (customization, technical support)

    24. 24 Service Level Agreements Key Performance Indicators (KPIs) should focus on three key areas: Service delivery Service quality Program metrics Measure on a monthly or quarterly basis

    25. 25 Measuring the Results All measurements to be quantitative Establish and maintain simple and clear process within each metric Consider incentive for exceeding expectations

    26. 26 Service Level Agreements Financial scale for incentives & penalties should be weighted in proportion to: Importance to success of program Penalty must be significant enough to create motivation

    27. 27 SLA – KPI Examples Fare accuracy Telephone service performance Traveler survey Cost per transaction Support of primary suppliers

    28. 28 Questions and Answers

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