Managing supplier relationships is one of the key components of a travel procurement programme says Kele Mohatle, CEO of travel procurement consultancy NaKo Consulting, in this month’s SmartProcurement.
As a travel buyer you need to be clear on the intended purpose and the desired outcome: while the intended purpose may be to identify strategic suppliers and segment them as such, the outcome would be building long-term partnerships, achieving savings and containing costs.
Where to start?
1. Spend analysis
Conduct a thorough spend analysis using management reports received from your partner Travel Management Company (TMC). Ideally you should have one TMC – two if it is a real business need. Having one TMC is ideal as the information is sourced centrally and is pulled in one format. First prize would be 24 month’s data, which provides for year-on-year comparison. However, a minimum of 12 months will provide an acceptable level of information.
Here, the data analysis should tell you What? Who? How? and Why? This is an in-depth analysis of your travellers’ spend with airlines, accommodation, car hire, transfers and shuttle services, etc.
2. Supplier segmentation
This step in the process is critical as it will determine which of your partners are strategic and which of them are non-strategic. Equally important is understanding how each strategic partner classifies your business – do they see you as strategic? There is no point in classifying a supplier as strategic if they only see you as non-strategic or, worse, a nuisance client. This cannot be based on assumption. It requires engaging with the supplier and understanding how they intent building a partnership with you.
Further, depending on your spend, you should at least consider a minimum of two strategic suppliers (it is challenging when your sole supplier is not available to assist travellers): it creates competition between suppliers and eliminates complacencies.
This step also provides input on your ad-hoc or non-strategic suppliers and whether there is an opportunity to consolidate as much as possible and identify minimal non-strategic suppliers.
3. Develop supplier strategies
How do you manage these suppliers?
Strategic suppliers will be handled differently to non-strategic suppliers – based on the risk impact to your business should they not deliver. Here corporate agreements must also include service level agreements (SLAs) that are SMART (specific, measurable, achievable, realistic, time-bound), including business reviews and supplier performance.
For a TMC contract, a travel buyer must carefully consider the imposition of penalties on supplier performance (and must consider his or her own performance as a client), as this can create unnecessary strain on the relationship between parties. Also consider rewarding suppliers that exceed expectations.
A non-strategic-supplier-strategy should be developed to promote short-term relationship benefits and possibly long-term gains. Spend analysis combined with supplier consolidation can turn a currently non-strategic supplier into long-term strategic supplier.
An important aspect of developing a supplier strategy is risk mitigation – what are the risks associated with the identified strategic suppliers and how will these be managed?
A typical consideration is the financial position of a preferred supplier: corporates for which 1Time was a preferred supplier (owing to cost savings/containment initiatives) felt the impact of the low-cost carrier going under.
4. The change and implementation plan
Here the communication plan plays a major role in change management. You need to lobby internal and external support so that your desirable outcome is achieved. So too is the implementation plan critical as it includes testing of the corporate agreements in the identified booking channels or systems.
In conclusion, supplier relationship management should reside with the travel buyer and not necessarily the TMC as it does not matter who your TMC is – your suppliers remain your suppliers. However, it is important that your TMC is part of the process so that they can support it.
For more information on travel procurement advisory, contact Kele Mohatle at email@example.com