Every time a downturn hits, your average organization immediately responds by cutting the two T’s, travel and training, despite the fact that these actions are among the dumbest things it can do. First of all, you want your people to do more with less, which is something they can only do if they are well trained and up to date. Furthermore, with training usually clocking in at 10% of overall compensation for an average employee, or less, it’s a drop in the bucket. Secondly, you have to keep buying and selling … and as much as you’d like to think it can all be done “virtual”, sometimes you need face-to-face interaction. Ask the top 20% of your sales team the secret to their success and why they account for 80% of your sales and they’ll all tell you the same thing … face-to-face negotiations and customer relationship development. Then ask the procurement managers responsible for managing your top performing suppliers and you’ll hear the same thing … face-to-face negotiations and regular face-to-face interaction.
While you can certainly reduce travel in tough times, and significantly cut costs with good management policies, you can’t cut travel completely. And if the budget is tight, you certainly can’t let each department manage it willy nilly. That’s why I was glad to see a recent article in Procurement regarding travel expense management and how purchasing insight figures big in winning strategy, even if it was a long, meandering article that took too long to get to the point.
As the article points out, every company has two types of travel: necessary and unnecessary. Key contract negotiations with (big) potential customers, key contract negotiations with suppliers, supplier site inspections, and regular performance review meetings with suppliers are necessary travel. A finance or sales retreat to Tampa (from San Francisco, for example) is not. In the first case, the human interaction is often the key to a deal. In the latter, while your team does need an off-site every now and again for training, interaction, and a little relaxation, if money is tight, there’s no reason it can’t be at the glitzy hotel or conference center down the street. Many of us move and travel so much these days, it’s often the case that the city we know the least about is the one we live in. Procurement, used to strategically analyzing spend and supply, is in the perfect position to help you figure out what travel spend is strategic, what travel spend generates returns, and what travel spend should be cut. Thus, they’re in the perfect position to help your organization revise the travel policy so that you not only get the most bang for your buck, but turn the cost center into a revenue generating center.
Furthermore, as the organization that analyzes and negotiates deals day in and day out, they’re in the best position to help you select the right preferred carriers, define booking policies to minimize costs, and implement travel management systems, such as the service management solution provided by Rearden Commerce (the unique solution for travel procurement), that will help your employees adhere to policies and select the lowest cost options that meet their needs every time. So use Procurement to maximize your travel spend. Maximizing spend is what Procurement does best.
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