Showing posts with label buyer. Show all posts
Showing posts with label buyer. Show all posts
Tuesday, 28 February 2017
Who should buy travel? (Part one)
This debate has rumbled on for a very long time and I expect it will continue particularly at this time of financial and strategic difficulty. Suppliers have to earn more and corporations have to pay less to achieve their recovery strategy so it has never been more important that the function in the middle of the pricing debate gets it right. If they don’t we will end up either with less products or fewer customers or perhaps both. The key reason for there being an impasse in this debate is there is no right answer for all the stakeholders. It very much depends on the flexibility, specialist knowledge and skills of individuals concerned.
It is not an easy subject to comment on without rubbing someone up the wrong way and getting called biased to one particular part of the supply chain. Although I was very much a TMC man I now feel I can look back more objectively and hopefully put forward some valid considerations to be taken into account. For example I do not believe this activity should be outsourced to a TMC in the current climate as they will be viewed sceptically by the suppliers and not have sufficient mandate within the corporation. It also has the potential of removing ongoing control of the programme, especially within large organisations and their global subsidiaries.
To understand the challenge and make an informed decision you have to know the key issues. I believe many of you know them so I hope you will bear with me while I ad my thoughts on them. Rather like buying most things the secret is to get the correct blend between quality of product and price. In the travel arena this is easier said than done especially when the product is either a commodity or a service and more likely both. In this environment the corporation needs to look closer at a) what exactly they want to buy and b) how they are going to manage the programme to maximum gain when it starts. A decision has to be made as to who in the company is suited to doing both jobs or if the project should be split into two parts. This is where it mainly goes wrong as one task naturally blends into the other.
If you put the TMC and outside consultants aside for a moment that really leaves just two functions which are procurement and the travel manager. One view is that a buyer is expert at buying a commodity and a travel manager is much better at controlling a service. Having seen both in action more times than I can remember it is very rare indeed to find one person who can lead both functions successfully as the skill –set is so different.
So there we have it. When a buyer says it should be their job they are probably as wrong as the travel manager who says it should be them. In my opinion there are only two alternatives. One is that you go out and find that rare breed of person who can both buy professionally and manage a complex service orientated project. After all travel is a commodity when you buy but turns into a service when you use it. The second option (and best in my opinion) is to form a triumvirate of a buyer, a travel manager and a leader who should be a senior board member with a strong mandate from his colleagues. All three should work together from concept to strategy to buying to delivery. This liaison should not stop at delivery but move forward to ensure disciplines and benefits are achieved.
What about the suppliers? Who should be negotiating what with whom?
I will put forward my views in part two but I can say now that I think it works pretty badly in general!
Tuesday, 28 December 2010
A different approach to TMC negotiations?
I think one of the most disappointing outcomes from contract negotiation is that between corporations and TMCs. You can practically guarantee that one side or the other, or in time both, are not enamoured with the end results. The corporation wants total priority and service delivery at the lowest unit price whilst the TMC spends its time trying to figure out how to comply whilst clawing back profitability elsewhere in the deal or through caveats.
Another disappointment is that many of these negotiations are so combative. It is almost like trying to play a game of poker where the TMC has to play with his cards face up and the corporation with theirs to their chest. How can you get a good result when the beginning is riddled with various levels of speculation and possibly deceit? There really must be a better way.
I would really like to see such methodology turned 180 degrees. The RFP should be changed to an IFB (information for bidders). This IFB would say ‘look, this is what we think we really want’ and ‘here is a list of the important things in priority. Can you think of anything you could add to improve our service and savings? Here are the problems we currently have and how can you help resolve them’. The corporation would then receive an inflow of pertinent and creative ideas rather than getting a load of bland ‘comply/not comply’ answers to a bunch of sometimes irrelevant questions.
Having narrowed the field down to those TMC that have shown the right level of flair and innovation one could then move on to what they are hoping to achieve from winning the contract in both money terms and ongoing partnership. This would be much better than dragging in a TMC that has been cut to the bone and is frankly going to favour the client that brings more revenue and longevity.
Having now discovered what both parties want it is time to sit down together and thrash out how both can be achieved with as little compromise as possible. I can think of lots of ways to doing this in a way that protects commits and rewards.
Otherwise I guess people can continue what they are doing now. Issuing an RFP the size of a small book to TMCs who will be initially judged on how they answer a bunch of questions that really do not address the real issues. After all, the large TMCs can answer the questions any way they think you want to hear them and are probably already handing numerous Fortune 500 companies who asked the same.
So there we have it. Naïve? Workable? Or both?
Your guess is as good as mine!
Another disappointment is that many of these negotiations are so combative. It is almost like trying to play a game of poker where the TMC has to play with his cards face up and the corporation with theirs to their chest. How can you get a good result when the beginning is riddled with various levels of speculation and possibly deceit? There really must be a better way.
I would really like to see such methodology turned 180 degrees. The RFP should be changed to an IFB (information for bidders). This IFB would say ‘look, this is what we think we really want’ and ‘here is a list of the important things in priority. Can you think of anything you could add to improve our service and savings? Here are the problems we currently have and how can you help resolve them’. The corporation would then receive an inflow of pertinent and creative ideas rather than getting a load of bland ‘comply/not comply’ answers to a bunch of sometimes irrelevant questions.
Having narrowed the field down to those TMC that have shown the right level of flair and innovation one could then move on to what they are hoping to achieve from winning the contract in both money terms and ongoing partnership. This would be much better than dragging in a TMC that has been cut to the bone and is frankly going to favour the client that brings more revenue and longevity.
Having now discovered what both parties want it is time to sit down together and thrash out how both can be achieved with as little compromise as possible. I can think of lots of ways to doing this in a way that protects commits and rewards.
Otherwise I guess people can continue what they are doing now. Issuing an RFP the size of a small book to TMCs who will be initially judged on how they answer a bunch of questions that really do not address the real issues. After all, the large TMCs can answer the questions any way they think you want to hear them and are probably already handing numerous Fortune 500 companies who asked the same.
So there we have it. Naïve? Workable? Or both?
Your guess is as good as mine!
Is Government Buying Wisely?
Being part of the European ‘nanny state’ must have its advantages…..although I can’t quite think of even one at this time. Most definitely government travel buying, or for that matter any kind of state procurement is not one. The conditions, deadlines, red tape, mandatory declarations and disclosures are such that the likelihood of a smart or mutually worthwhile deal is small.
Until I got involved in the process I have always been perplexed as to why, if there are so many procedures and rules government projects always end up costing much more than the original contract. In the UK you only have to look at the Channel Tunnel, the Millennium Dome and Wembley Sport Stadium as examples of this. Why is this I thought, and then I got involved in a major UK government travel tender myself and saw what I think could be the key contributors to cost and timing failures. I will share my experience and subsequent assumptions with you but I must state at the outset that these are my own personal thoughts and not those of the company I worked for at the time.
If you are a private company you can set your own tender schedule and process. In government you cannot. There is a strict procedure in relation to timelines, disclosure, format and bidder selection you must keep to. On the surface this might seem highly laudable but in actuality it becomes restrictive, eliminates flexibility and costly in unnecessary administration and process. It also works on the basis that you know exactly what you want to buy as this has to be declared and published at the outset. Unfortunately, such is the size, mix and variety of such contracts that this essential is unknown and is probably a part of why the business is out to bid in the first place.
So what are these restrictions I am talking about? Here are some of the key ones as I perceive them:
1/ you have to publish all details of the contract and bid process in advance across European and give all equal opportunity to bid. You cannot be seen as individually selective or discriminatory in any way even if you are wasting your time or that of bidders who stand no chance of success.
2/ At this stage you must declare exactly what you are putting out to tender and you cannot easily change it even if you do not really know if it is accurate or not.
3/ the system seems to prevent any informal or individual dialogue with potential suppliers without giving everyone equal opportunity so there is no way building understanding, knowledge or relationships in order to improve/modify the brief.
4/ Everything has to be done by the book on a ‘one size fits all’ basis even though these contracts are some of the most diverse one is ever likely to come across.
5/ Government bodies seem incapable of aportioning or sharing out costs and savings amongst themselves which means that pricing is a nightmare and the potential of negotiating a fair and equitable financial package is minimized.
If you put some or all the above together you end up in a no win situation as the buyer has had to follow an entirely unhelpful process ending up with an oversimplified deal full of loopholes. The seller has to find some way of picking up the pieces while making a profit and minimising negative exposure.
At the beginning of this piece I mentioned that, in my eyes, most government contracts end up costing far more than the original contract agreement. I personally think it may be as a result of my point in the previous paragraph. What can end up happening is that the supplier goes in at a rock bottom unit price but then builds in a whole raft of necessary caveats in case the core buyer RFP is wrong ,which of course it is. The buyer is not able to hold contingency funds or apportion out costs internally so they have no way of dealing with it. The end result is that the government has an embarrassing overspend and the supplier makes their money out of charging caveats built in for ‘out of scope’ activities.
I write this for two reasons. Firstly I think it is wrong that any government should have to ignore sound commercial tactics and hog tie itself with bureaucracy when buying. Secondly, as a tax payer, it is my money they are wasting.
Until I got involved in the process I have always been perplexed as to why, if there are so many procedures and rules government projects always end up costing much more than the original contract. In the UK you only have to look at the Channel Tunnel, the Millennium Dome and Wembley Sport Stadium as examples of this. Why is this I thought, and then I got involved in a major UK government travel tender myself and saw what I think could be the key contributors to cost and timing failures. I will share my experience and subsequent assumptions with you but I must state at the outset that these are my own personal thoughts and not those of the company I worked for at the time.
If you are a private company you can set your own tender schedule and process. In government you cannot. There is a strict procedure in relation to timelines, disclosure, format and bidder selection you must keep to. On the surface this might seem highly laudable but in actuality it becomes restrictive, eliminates flexibility and costly in unnecessary administration and process. It also works on the basis that you know exactly what you want to buy as this has to be declared and published at the outset. Unfortunately, such is the size, mix and variety of such contracts that this essential is unknown and is probably a part of why the business is out to bid in the first place.
So what are these restrictions I am talking about? Here are some of the key ones as I perceive them:
1/ you have to publish all details of the contract and bid process in advance across European and give all equal opportunity to bid. You cannot be seen as individually selective or discriminatory in any way even if you are wasting your time or that of bidders who stand no chance of success.
2/ At this stage you must declare exactly what you are putting out to tender and you cannot easily change it even if you do not really know if it is accurate or not.
3/ the system seems to prevent any informal or individual dialogue with potential suppliers without giving everyone equal opportunity so there is no way building understanding, knowledge or relationships in order to improve/modify the brief.
4/ Everything has to be done by the book on a ‘one size fits all’ basis even though these contracts are some of the most diverse one is ever likely to come across.
5/ Government bodies seem incapable of aportioning or sharing out costs and savings amongst themselves which means that pricing is a nightmare and the potential of negotiating a fair and equitable financial package is minimized.
If you put some or all the above together you end up in a no win situation as the buyer has had to follow an entirely unhelpful process ending up with an oversimplified deal full of loopholes. The seller has to find some way of picking up the pieces while making a profit and minimising negative exposure.
At the beginning of this piece I mentioned that, in my eyes, most government contracts end up costing far more than the original contract agreement. I personally think it may be as a result of my point in the previous paragraph. What can end up happening is that the supplier goes in at a rock bottom unit price but then builds in a whole raft of necessary caveats in case the core buyer RFP is wrong ,which of course it is. The buyer is not able to hold contingency funds or apportion out costs internally so they have no way of dealing with it. The end result is that the government has an embarrassing overspend and the supplier makes their money out of charging caveats built in for ‘out of scope’ activities.
I write this for two reasons. Firstly I think it is wrong that any government should have to ignore sound commercial tactics and hog tie itself with bureaucracy when buying. Secondly, as a tax payer, it is my money they are wasting.
Who should buy travel? (Part two)
In part one I gave my view as to who should buy travel within a corporation. To recap, I pointed out that no one person should do it. Instead an alliance of procurement and operational management was required pulled together by the influence and gravitas of a hands-on board sponsor. In the mix of travel there is no way to success if the person buying is not linked seamlessly with those who will manage the contract and they can both give up unless there is someone on the board who fully contributes and ensures top down buy-in to the programme. Surely with the complexity, emotional factors and likelihood for misunderstanding this extra effort is worthwhile?
Here in this follow-up I will submit my view on whom in suppliers should negotiate with corporations and how, as I can say from the outset that from what I saw this process is often flawed. If you put the wrong person in front of a professional buyer you deserve everything you get. By wrong person I mean anybody that is not researched, not empowered and lacks crucial client understanding. If a buyer does not know his own volumes or traveller behaviour they too will become unstuck. Obvious really but it is a starting point as so often these ‘givens’ are not evident.
Sales are the lifeblood of any supplier especially during times of diminished and uncertain market conditions yet you would be hard pressed to see much evidence of this. To survive and thrive you would need to be decisive, flexible and have the right attitude towards prospective customers yet I think I would find very few buyers who have observed these necessary traits in their negotiations.
Many travel suppliers (especially major airlines) still seem to think there is their way or no way. The old style still thrives where a supplier will create their strategy and programmes, drive it into their sales teams and say this is the only way people can buy from us. The sales folk then have to go out with minimal flexibility or authority and try to tell the customer why they will have to fit in with what the seller wants. Some of these sales folk are little more than front line ‘cannon fodder’.
I cannot see why a far more productive approach cannot be taken. If you are selling to a high volume senior corporation then you should send out someone of a comparable level with a full mandate to close the deal. That person should not have one type of programme but a range tailored for the differing types of customer out there. It is not rocket science but prospect customers should be researched to discover what their philosophies and missions are, what their previous issues have been and what their capability to deliver is. Elementary I know but it actually happens very rarely.
If I was a buyer the first thing I would do is examine my own company well. Granted the numbers are important but equally so are the levels of internal support, mandate and cross company delivery any negotiated programme is likely to get. If you do not do this any deal could end up compromised or possibly an unpopular, unproductive financial and political liability. As I have said before you may be thinking you are buying a commodity but it quickly becomes a service as soon as the contract ink dries.
I mentioned earlier that there should be a range of potential deals and services to choose from which should deliver increased volume to suppliers and lower prices to buyers. There are plenty of ideas out there but few seem to make it past the internal discussion phase. For example I cannot understand why there cannot be different day and time pricing on individual airline routes. If you looked at airlines flying between London and New York you would find some flights at specific times and dates are always full whilst others go half empty. Why not give your best price on the slack flights?
Airlines could also give bigger rewards to corporations who save them money. By this I mean better deals for corporations who book early and whose travellers always turn up. Why not give bonuses to corporations and travellers who do such things which enable suppliers to maximise their loads and reduce costs. It still puzzles the hell out of me that suppliers still seem to allow people to not turn up without penalty as it must cost them a fortune. What other industry would allow that?
So there you have some simplistic but hopefully logical thoughts and recommendations. Suppliers should be flexible and recognise the individuality of corporations whilst buyers should spend more time ensuring they can deliver their part of the bargain.
Here in this follow-up I will submit my view on whom in suppliers should negotiate with corporations and how, as I can say from the outset that from what I saw this process is often flawed. If you put the wrong person in front of a professional buyer you deserve everything you get. By wrong person I mean anybody that is not researched, not empowered and lacks crucial client understanding. If a buyer does not know his own volumes or traveller behaviour they too will become unstuck. Obvious really but it is a starting point as so often these ‘givens’ are not evident.
Sales are the lifeblood of any supplier especially during times of diminished and uncertain market conditions yet you would be hard pressed to see much evidence of this. To survive and thrive you would need to be decisive, flexible and have the right attitude towards prospective customers yet I think I would find very few buyers who have observed these necessary traits in their negotiations.
Many travel suppliers (especially major airlines) still seem to think there is their way or no way. The old style still thrives where a supplier will create their strategy and programmes, drive it into their sales teams and say this is the only way people can buy from us. The sales folk then have to go out with minimal flexibility or authority and try to tell the customer why they will have to fit in with what the seller wants. Some of these sales folk are little more than front line ‘cannon fodder’.
I cannot see why a far more productive approach cannot be taken. If you are selling to a high volume senior corporation then you should send out someone of a comparable level with a full mandate to close the deal. That person should not have one type of programme but a range tailored for the differing types of customer out there. It is not rocket science but prospect customers should be researched to discover what their philosophies and missions are, what their previous issues have been and what their capability to deliver is. Elementary I know but it actually happens very rarely.
If I was a buyer the first thing I would do is examine my own company well. Granted the numbers are important but equally so are the levels of internal support, mandate and cross company delivery any negotiated programme is likely to get. If you do not do this any deal could end up compromised or possibly an unpopular, unproductive financial and political liability. As I have said before you may be thinking you are buying a commodity but it quickly becomes a service as soon as the contract ink dries.
I mentioned earlier that there should be a range of potential deals and services to choose from which should deliver increased volume to suppliers and lower prices to buyers. There are plenty of ideas out there but few seem to make it past the internal discussion phase. For example I cannot understand why there cannot be different day and time pricing on individual airline routes. If you looked at airlines flying between London and New York you would find some flights at specific times and dates are always full whilst others go half empty. Why not give your best price on the slack flights?
Airlines could also give bigger rewards to corporations who save them money. By this I mean better deals for corporations who book early and whose travellers always turn up. Why not give bonuses to corporations and travellers who do such things which enable suppliers to maximise their loads and reduce costs. It still puzzles the hell out of me that suppliers still seem to allow people to not turn up without penalty as it must cost them a fortune. What other industry would allow that?
So there you have some simplistic but hopefully logical thoughts and recommendations. Suppliers should be flexible and recognise the individuality of corporations whilst buyers should spend more time ensuring they can deliver their part of the bargain.
Who should buy travel? (Part one)
This debate has rumbled on for a very long time and I expect it will continue particularly at this time of financial and strategic difficulty. Suppliers have to earn more and corporations have to pay less to achieve their recovery strategy so it has never been more important that the function in the middle of the pricing debate gets it right. If they don’t we will end up either with less products or fewer customers or perhaps both. The key reason for there being an impasse in this debate is there is no right answer for all the stakeholders. It very much depends on the flexibility, specialist knowledge and skills of individuals concerned.
It is not an easy subject to comment on without rubbing someone up the wrong way and getting called biased to one particular part of the supply chain. Although I was very much a TMC man I now feel I can look back more objectively and hopefully put forward some valid considerations to be taken into account. For example I do not believe this activity should be outsourced to a TMC in the current climate as they will be viewed sceptically by the suppliers and not have sufficient mandate within the corporation. It also has the potential of removing ongoing control of the programme, especially within large organisations and their global subsidiaries.
To understand the challenge and make an informed decision you have to know the key issues. I believe many of you know them so I hope you will bear with me while I ad my thoughts on them. Rather like buying most things the secret is to get the correct blend between quality of product and price. In the travel arena this is easier said than done especially when the product is either a commodity or a service and more likely both. In this environment the corporation needs to look closer at a) what exactly they want to buy and b) how they are going to manage the programme to maximum gain when it starts. A decision has to be made as to who in the company is suited to doing both jobs or if the project should be split into two parts. This is where it mainly goes wrong as one task naturally blends into the other.
If you put the TMC and outside consultants aside for a moment that really leaves just two functions which are procurement and the travel manager. One view is that a buyer is expert at buying a commodity and a travel manager is much better at controlling a service. Having seen both in action more times than I can remember it is very rare indeed to find one person who can lead both functions successfully as the skill –set is so different.
So there we have it. When a buyer says it should be their job they are probably as wrong as the travel manager who says it should be them. In my opinion there are only two alternatives. One is that you go out and find that rare breed of person who can both buy professionally and manage a complex service orientated project. After all travel is a commodity when you buy but turns into a service when you use it. The second option (and best in my opinion) is to form a triumvirate of a buyer, a travel manager and a leader who should be a senior board member with a strong mandate from his colleagues. All three should work together from concept to strategy to buying to delivery. This liaison should not stop at delivery but move forward to ensure disciplines and benefits are achieved.
What about the suppliers? Who should be negotiating what with whom?
I will put forward my views in part two but I can say now that I think it works pretty badly in general!
It is not an easy subject to comment on without rubbing someone up the wrong way and getting called biased to one particular part of the supply chain. Although I was very much a TMC man I now feel I can look back more objectively and hopefully put forward some valid considerations to be taken into account. For example I do not believe this activity should be outsourced to a TMC in the current climate as they will be viewed sceptically by the suppliers and not have sufficient mandate within the corporation. It also has the potential of removing ongoing control of the programme, especially within large organisations and their global subsidiaries.
To understand the challenge and make an informed decision you have to know the key issues. I believe many of you know them so I hope you will bear with me while I ad my thoughts on them. Rather like buying most things the secret is to get the correct blend between quality of product and price. In the travel arena this is easier said than done especially when the product is either a commodity or a service and more likely both. In this environment the corporation needs to look closer at a) what exactly they want to buy and b) how they are going to manage the programme to maximum gain when it starts. A decision has to be made as to who in the company is suited to doing both jobs or if the project should be split into two parts. This is where it mainly goes wrong as one task naturally blends into the other.
If you put the TMC and outside consultants aside for a moment that really leaves just two functions which are procurement and the travel manager. One view is that a buyer is expert at buying a commodity and a travel manager is much better at controlling a service. Having seen both in action more times than I can remember it is very rare indeed to find one person who can lead both functions successfully as the skill –set is so different.
So there we have it. When a buyer says it should be their job they are probably as wrong as the travel manager who says it should be them. In my opinion there are only two alternatives. One is that you go out and find that rare breed of person who can both buy professionally and manage a complex service orientated project. After all travel is a commodity when you buy but turns into a service when you use it. The second option (and best in my opinion) is to form a triumvirate of a buyer, a travel manager and a leader who should be a senior board member with a strong mandate from his colleagues. All three should work together from concept to strategy to buying to delivery. This liaison should not stop at delivery but move forward to ensure disciplines and benefits are achieved.
What about the suppliers? Who should be negotiating what with whom?
I will put forward my views in part two but I can say now that I think it works pretty badly in general!
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