29/04/2010

By Claire Rowley, Travel Category Specialist, buyingTeam

"Travel is a controllable cost but greater visibility and management of your supply chain are essential."

The recent economic climate has caused many companies to once again put their travel costs under the spotlight, and with the increased use of video conferencing and other tools which eliminate much of the need for long-haul travel, these costs can often be difficult for businesses to justify. This is especially the case for small and medium-sized companies, where margins are already tight. However, for some, long-range travel is unavoidable. So how can companies protect their bottom line while continuing to provide the services that their customers require?

Travel costs are controllable, and a comprehensive travel policy should form the backbone of every business’s approach to its travel requirements. Such policies not only enable greater visibility and control over travel expenditure but also lay the foundations for negotiating best value within preferred supplier agreements.

These supplier agreements, together with defined booking and payment processes provide a number of benefits for companies. First, the appointment of a Travel Management Company (TMC) enables companies to benefit from relationships held by the TMC. For small to medium enterprises (SMEs) with more irregular travel requirements, negotiating discounts can be more challenging, but TMCs, as specialists with access to many different sources, book large volumes of travel for a wide range of customers and have access to numerous favourable rates and terms that they are able to pass on. The same is true of Hotel Booking Agents (HBAs), which also have access to discounts that are passed on to customers. In some cases, this represents minimal costs to the client, as many HBAs receive commission on their bookings from hotel and venue suppliers, which often means that additional booking fees are not passed on to customers.

The appointment of a TMC also provides companies with up-to-date management information about their employees’ travel plans, which can be vital if incidents happen while they are abroad and ensures compliance with legislation such as the Corporate Manslaughter Act. TMCs can dispatch real-time information to companies regarding the location of their employees so that arrangements can be made to ensure their safety and return to the UK. The benefits of this approach were demonstrated by the recent disruption to air travel caused by the volcanic eruption in Iceland. Management information is also important to allow for continuous benchmarking exercises - the data given allows clients to understand travel patterns, spend and how best they can leverage their volumes.

At a more strategic level, policies are also shown to drive good buying behaviours. They help companies control the choices available to their employees, allowing them to develop and preserve a slick and robust supply chain. This, over time, should lead to greater potential for leveraging their spend and improving commercial agreements For companies where an ‘online’ culture is already the norm, increasing use of web-based management tools can help to increase value and reduce transactional costs further. However, some prefer the comfort of having a point of contact with whom they can discuss their requirements, particularly for more complex travel requirements.

Clear evidence from our work with buyingTeam’s clients, demonstrates that the use of travel policies and employing TMCs have been known to generate significant savings. For an SME operating within tight profit margins, this saving represents an important boost to its bottom line and demonstrates the tangible value of paying closer attention to travel costs throughout the business. With companies having to operate under continued pressure in today’s challenging economic environment, it is initiatives such as these that can help to maintain financial flexibility and allow their teams to focus on day-to-day activities.

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