When it comes to negotiating savings, leveraging volume to take advantage of supplier efficiencies and economies of scale to drive down prices based on forecasted demand has always been procurement’s standard operating procedure.
But what about the spend categories and situations where demand is significantly lower than in the past? Can procurement still deliver savings and value when spending less? Absolutely – but it requires a different bag of tricks.
Business travel is a prime example. The number of corporate trips and in-person meetings has been significantly reduced in result of the COVID-19 pandemic. According to the Global Business Travel Association’s November 2021 forecast, global business travel spending fell by 54% from 2019 to 2020. They don’t expect business travel to be back to pre-pandemic levels until 2024. As a result, leveraging volume is not going to be an effective strategy for procurement. We are going to have to find another way.
Fortunately, there are multiple proven approaches that procurement can take to deliver savings that don’t require large volumes of spend. What they do require is data: clean, trusted sources of data that provide insight into how much the business is spending, what they are spending it on, and how it helps them achieve their objectives. Taking a data-driven approach also offers procurement the opportunity to build a sophisticated understanding of the business travel category, providing ample opportunities for additional value creation as well.
A data-driven approach to delivering an increased ROI while managing decreased business travel spend includes the following steps:
Procurement addresses many different expense categories on a regular basis, but business travel is unique. And if the goal is to deliver savings and value even while spending is down, their approach must be unique as well, something visionary Chief Procurement Officers understand.
“There are decisions about T&E that are also unique, in part because employees often view travel as personal. Being able to wrap your arms around the different strategies which are tailored to the nature of spend and still have an approach for the entire spectrum of spend is how you gain success,” said Kathy Hinton, former CPO for Tesoro Corporation, in a recent interview.
Kathy Hinton’s point about “tailored” strategies is well-suited to managing reduced volume spend categories. In fact, when there is less employee spend to manage, procurement can leverage precision and clarity instead of volume to deliver results, meeting cost efficiency targets and traveler expectations at the same time.
For more information, read Four Insights Every CPO Should Know About Travel & Expense by SAP Concur.
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