With procurement's influence over corporate travel management on the rise in many organisations, it's rather surprising that so many suppliers complain that unsolicited client RFPs arrive on a virtually daily basis. Suppliers, keen to maximise their sales function, reasonably feel they need to assess the return on investment for each bid. With little or no relationship in place with the client, a dreaded 'no bid' will often follow.
From experience I can tell you it's a painful experience being in a procurement department when suppliers choose not to bid. Buyers need to do everything in their power to become the customer of choice. Good supplier engagement, with both incumbents and others, is critical.
Why do many procurement folk seem unwilling to engage non-contracted suppliers during the life of a contract?
1. Buyers' fear that incumbent suppliers will interpret talking to other suppliers as disloyalty
There is a feeling that a buyer is being somewhat disloyal to an incumbent by talking to alternative suppliers; an illicit meeting in a dark corner of the Business Travel Show is not to be talked about and there is a fear of being spotted.
Good strategic sourcing involves effective supplier relationship management with both incumbents and non-incumbents.
As buyers, we need to build trust with partners. We (and they) need to get comfortable speaking to the competition. Unlike a marriage, for supplier management, we need to be comfortable we have made the best choice and the supplier should be constantly challenged to maintain their leading edge.
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Suppliers must fit within the travel programme; nuturing relationships will lead to transparency ©Fodor90/iStock2. Over-cautious interpretations of anti-bribery regulations
I've known buyers to liberally quote UK anti-bribery regulations as reasons not to engage with non-incumbent suppliers (or for that matter incumbent ones). It is true that the UK has some of the tightest regulations in this area. Whether it's a simple meeting, or corporate hospitality, procurement folk seem unwilling to challenge internal interpretations of policy, despite the obvious effect it has on the ability to harness procurement best practice.
While on the subject of hospitality, UK Serious Fraud Office (SFO) director Robert Alderman made it quite clear when he said, "sensible proportionate entertaining or promotional expenditure" is "perfectly lawful" but if a company pays for a prospective client's "month-long all expenses paid Caribbean holiday you will not be surprised if the SFO takes an interest". I'm at a loss as to how this could possibly apply to a well-structured meeting with a potential supplier with clear agenda and outcomes but some buyers think it does.
A former manager of mine, wanting to strike a balance between empowering staff and engendering the right decision making thought process around meetings and hospitality said, "Let's for a second assume you need to ask me permission. If you would feel in any way uncomfortable doing so, then the answer will be no."
Suppliers in turn have a duty to make sure any face time with a client, or prospective client, is productive and that outcomes are followed up. Travel managers have far too many stories about supplier sales managers who tell you about 40 new hotels in a part of the world to which you have never travelled; such meetings only happen once.
3. An unwillingness for some buyers to act tactically rather than strategically
Finally, I feel this is all part of a wider issue. Travel management does not often command the respect it deserves within organisations. Many travel managers seem unwilling to elevate the industry or their roles above that of tactical buyers for non-business critical services or products. It's no coincidence that companies running best-in-class travel programmes have both long-term relationships with suppliers and the ability to articulate the criticality of travel to an organisation's senior management.
Category mapping and market engagement in strategic sourcing is highly sought after and encouraged. However, travel management is rarely treated as a direct or critical purchase, particularly by mid-sized companies. Tactical, rather than strategic, procurement skills are often deployed which keeps suppliers at arm's length, allowing the RFP to drive a competitive price. This is a good strategy for a non-critical, highly leveraged commodity with little impact on business but for a business enabler like travel? I'm not so sure.
Why effective industry engagement makes sense
The law of diminishing returns requires us to be more interested in qualitative rather than just quantitative assessment. This requires healthy competition and constant investment in R&D and innovation. This in turn relies on good procurement practice supported by market engagement so the industry understands buyers' needs.
Market engagement is key and healthy, drives innovation and ensures suppliers are motivated when it comes to an RFP. More interested suppliers = healthier competition + greater innovation + reduced cost.
Effective tendering requires energised and motivated suppliers hungry for business; but they will, in increasing numbers, not bid for business they do not know or understand. Therefore, procurement should place more effort on market engagement during the life of a contract.
Market engagement should be welcomed by all and conducted in an open and transparent manner, rather than in dark corners of booths at travel shows.
Public sector, often accused of analysis paralysis when it comes to procurement, do this well. The private sector could learn a lot from public sector counterparts.
How we can do it?
Buyers
Procurement folk, particularly those more junior, feel unable to challenge age-old processes that define a cyclical process somewhat cynically described as bid, implement, throttle and repeat. Best-in-class travel management now often relies on collaboration, innovation and partnership; all of which should be music to procurement's ears.
Whether we are using competition or collaboration to drive supplier relationship strategies, spending time with suppliers, both incumbents and otherwise, is critical to success.
Set clear guidelines to be disseminated with international and virtual teams as well as key stakeholders who maybe meeting suppliers separately. Rules of engagement and common areas of discussion should be aligned across an organisation.
Do some capability building by providing feedback to incumbent and non-incumbent suppliers about areas in which you would like to see more R&D. Flag up where a supplier may be falling behind its competition. They would surely prefer this than simply being told when they have lost the business or failed in an expensive bid.
Suppliers
Incumbent suppliers are, somewhat unsurprisingly, protective of clients, and discourage them from talking to the marketplace. This behaviour should be viewed with suspicion: what do they have to hide? Viewed another way, why not have a content client reporting back to you on what R&D they would like to see? A win-win situation, surely?
Suppliers must grasp these opportunities with both hands. Rather than plough through a sales speech, use the opportunity to build a relationship: what are their needs and wants? What are their incumbents doing well? And perhaps not so well? Where is their business going and what keeps the buyer awake at night?