Monday, March 22, 2010

Travel – Do I Have To??

This is nice...yet another guest blogger is about to make their debut on 1 Procurement Place! This time it's the turn of Lisa Hurst. Lisa has worked in the travel procurement field as both practitioner and consultant for quite a few years and, having worked with her personally, I can certainly say she knows her stuff. Lisa possesses an innovative, humorous and insightful take on this often challenging area for procurement professionals. I hope you'll enjoy the first of several posts from Lisa on this oh so sacred cow spend category....

Do you travel much? If you do, then you'd probably rather not. I used to love to travel. At the age of 5 I started flying from San Diego to Chicago every summer to visit my grandmother. I would get so excited as travel day approached and when the day of the trip arrived I would get dressed up in my Sunday best - hat, gloves, the whole enchilada. Now when I travel I have a special outfit made for comfort and minimal stripping - a sweat suit.

My grandmother was complaining recently that people don’t get dressed up any more to fly like they used to. Of course she hasn’t flown in over ten years so I had to explain the new landscape: first you book a trip online because if you want to speak with someone it will cost you at least $5; then you need to print your boarding pass at least two hours prior to your flight or the ticket you paid for will be sold again, with no refund to you; then when you get to the airport you have to wait in a mile-long line, unpack half your bag (you don’t dare check one as it adds another $50 to the trip), pack your toiletries into 4 ounce bottles and make sure it all fits into a quart bag, strip off half your clothes (for which I always felt I should get at least $1 per item), take your shoes off, then pray as you walk through the metal detector that you did not forget a quarter or learn the hard way that the silver bracelet you received as a gift is really plated. I could go on but you get the idea....

I’ve heard it over and over again that travel procurement is easy. Really? I’ve been doing it for years and have yet to find someone who understands all the intricacies and complexities. What I have learnt is that one of the best defenses in controlling travel expense is to have a policy in place that is mandated. If the policy is not enforced then you can kiss your opportunity for control and savings goodbye.

Another learning is that prior to creating your policy you first need to make hundreds of decisions! Starting with do you have the volume for an onsite agent? Should you use a brick and mortar agency or an online booking provider? Will the agency option you select allow your company the authority and ability to enforce travel policies for everyone?

When you've made your agency decision you have the complexity of selecting and negotiating with your preferred travel providers. Does your airline volume warrant a front end discount or a backend program? For hotels do you have enough volume to negotiate a chain wide discount or do you go with your agency’s discount options? Then it's on to the car rental companies and negotiating best possible rates for your company's main business travel locations. And this is just the top of the iceberg. You now need to deal with all the minutiae that can really escalate your costs if you do not address them and put all the necessary controls in place. With airlines you need to determine your stance on checked bags, pillows and blanket fees, eligible reasons for changing/cancelling a ticket, and dealing with business and personal air travel expenses. What standard of hotel will you allow your employees to stay in - Luxury/resort? High end? Mid/low? Will you require that the hotel needs to include free parking, breakfast and shuttle? And car rentals are really getting out of control with all the taxes imposed at airport pickups. Will you require off airport rentals to save costs? Can employees rent GPS? And what about those last minute dashes to the airport that result in refueling charges?

Oh and let's not forget the white elephant in the room….yes, many travelers have their own personal preferences for the airline, hotel and car rental agencies they use based on their status and the personal perks they receive from using those providers! So should you decide not to mandate travel policy and/or hold travelers accountable for complying with them then you can watch your company's travel costs sky rocket as employees make the rational choices that personally benefit them most.

Well…I’m off to find that sweat suit and my quart size toiletry bag! Wish me luck and safe travels to you!

Sunday, March 21, 2010

Letting Others Take Out the Trash: Punting the Small Stuff to Prioritize High Impact Sourcing Initiatives

Today it gives me great pleasure to welcome guest blogger Barnali Dasverma to 1 Procurement Place. Barnali is a Manager with Treya Partners and an acccomplished consultant and thought leader in the procurement field. She is also a candid and entertaining writer which is why I have been looking forward to her debut on 1PP for some time. Today Barnali delivers an insightful analysis of one of Procurement's greatest challenges in delivering value - how to avoid speading oneself so thin that one struggles to deliver value at all.....I'll let her explain....

Taking Out the Trash with a Smile

“If a business owner asks Procurement to take out the trash, we have to do it with a smile" were the words spoken by the CPO of a $3 billion national retailer and a past client of mine. This Procurement executive felt strongly that his department could not say “no” to stakeholders in his company. His organization gave a project with a $200K savings potential equal priority to another project capable of delivering $5 million, and staff were expected to dedicate similar levels of effort to both. In the quest to gain the trust, respect, and support of stakeholders - crucial for a procurement department to be effective - an overarching priority on customer service can sometimes compromise the pursuit of high-impact sourcing initiatives than could save millions for corporations and state governments. This needn’t be the case.

Learning How to Say No to the Small Stuff

In the six years I have spent as a spend management consultant, an inability to “say no to the small stuff” is something I have encountered repeatedly, both in the public and private sectors. Procurement organizations are often so dedicated to serving their internal customers that they spend far too much of their time and energy on low dollar value procurements and far too little time on high value, strategic sourcing initiatives with significant cost reduction potential. Unfortunately, there are only so many hours in the day, and if we don’t learn how to say no to the small stuff, we’ll never have enough time to dedicate to the "big stuff" projects that ultimately will have the most significant financial, operational, and strategic impact.

Punting Gently

So, am I advocating a war on drugs style “just say no” campaign? Of course not – I’ve been a sourcing geek far too long to promote such a simplistic, unrealistic solution. However, I do have a few ideas I’d like to share on how to punt the small stuff gently. First, begin by defining contract value thresholds at which your procurement department must get involved – delegate contracts below a defined dollar value, say $50K or less, to business owners in corporations or state agency personnel in the public sector. You’ll be surprised to find that in some cases, those internal customers are happy to handle the small stuff on their own – they may have been pulling in Procurement because they thought they were obligated to. In other cases, you may encounter some initial consternation that can be addressed by gradually weaning your internal customers off of Procurement.

Weaning Internal Customers off Procurement

Before embarking on the weaning process, create guidelines and templates to support your internal customers so they can get the guidance they need as they take ownership of low dollar value procurements. Develop a step-by-step guide to simple procurements that colleagues in other departments or agencies can use as a reference, and include basic advice like:

• “Request bids in the same format from at least 3 vendors”

• “Be sure to tie future price increases to the Consumer Price Index”

• “Include a travel expense cap on all professional services contracts”

• “Make sure the contract doesn’t include an automatic renewal clause”

In parallel, develop contract templates tailored to key purchasing areas (e.g. commodities, professional services, IT) and get these templates pre-approved by your legal department. Now consolidate your newly defined procurement policies, guides, and templates into an easy to understand toolkit that explains the rationale for the new approach - that procurement’s resources are limited and need to be prioritized on the highest value opportunities for the organization - but that clearly conveys Procurement will still be there to support business owners. Emphasize that while business owners will be expected to take ownership of low dollar value procurements going forward, procurement staff remain available for consultation and will be happy to provide coaching and guidance. Consider holding a “road show” within your company to personally communicate Procurement’s new approach and the reasons behind it.

Tracking Transformation & Focusing on Savings with a Smile

Ultimately, recognize that your procurement department can’t decline all the small stuff, but aim to have your staff spending at least 80% of their time working on high impact strategic sourcing initiatives – and most importantly, track this carefully to make sure it actually happens. Have each and every member of your team track their hours for the first six months after you implement your “punt the small stuff” efforts. Then, check in with each team member each month to understand what percentage of his or her hours is being spent on low and high value procurements, respectively. While you can’t get to your ideal 80/20 mix overnight, you should see consistent progress over time. By the time month six rolls around, any CPO who has embarked on this journey should be able to say, “Our procurement department has made it so easy for business owners to take out their own trash that they would never bother asking us to do it. Instead, we’re able to focus on creating substantial, hard-dollar savings - with a smile.”