Compliance is ticket to expanding travel policy at Tyco International
By Susan Avery -- Purchasing, 7/13/2006 2:00:00 AM
Compliance to contracts with preferred suppliers is helping Tyco International better leverage its $205 million travel spend and expand its travel policy around the world.
So says Stacey Taylor, director of strategic sourcing at Tyco, pointing to one of the company's airline partners recently adding European, Latin American and Asian points of sales to its contract. This means that Tyco employees based outside the U.S. can use discounted pricing available through an existing contract. "The airline never would have offered us these opportunities if we didn't have compliance to the contract," she says. On the other hand, if a customer is not in compliance, an airline can change its contract with just 30 days notice, as happened to many companies in the months after Sept. 11.
As airlines face difficult cost pressures, they are looking more closely at their customers' compliance to their contracts. "Meeting its commitments is important to Tyco," says Taylor, who uses various reporting tools to keep tabs on employee compliance to Tyco's recommended travel policy. Today, the company provides its airline partners with more international business than it states in its contracts, and is on par with its domestic business, she adds.
Another benefit of contract compliance: Tyco is able to build upon relationships it has with such travel suppliers as its car rental agency. The company is 98% compliant to that contract, and this type of support to the supplier has allowed them to expand with competitive offerings in Europe, Asia and Latin America.
A travel council. Contracts with the airlines and other travel providers such as hotels and car rental companies are negotiated at Tyco by a travel council made up of representatives of each of the company's four businesses—Healthcare, Electronics, Fire & Security, and Engineered Products & Services. Taylor has been with Tyco for more than eight years and leads the travel council. She also is responsible for the company's office supplies, office equipment, temporary labor, and recruiting services buys. She reports to Shelley Stewart Jr., senior vice president, operational excellence and chief procurement officer.
Tyco put its travel program into place in 2001. At the time, Tyco Healthcare had recently acquired Mallinckrodt, and Taylor, who was in the sourcing organization at the Healthcare business, was working to integrate the company into the Tyco travel program. Soon after learning that Mallinckrodt had a contract with the same travel agency, she determined that the acquisition also was receiving more favorable pricing. She brought the matter to the attention of the sourcing group at the corporate office, and it was decided that Tyco needed to take a new look at its travel buy. Each business was using its own travel agency at the time.
The Tyco travel council, which is made up of one representative of each business—either a travel manager, director or individual responsible for travel—resourced the then $120 million travel agency buy for the entire company. Using a strategic sourcing process, the travel council was involved every step of the way—from RFI (request for information) through negotiation and supplier selection to implementation. Ultimately, the council selected American Express as its agency. The new agreement took five months to implement.
"I think sourcing brings an objective, systematic methodology to the process," says Taylor, when asked of her role in the company's travel buy. She points to another area of the spend sourced by the council—air travel—as an example.
"We looked at the airlines as we would suppliers for a direct buy," she says, explaining that the council listed out 3,000 city pairs on its RFP (request for proposal). "We told the airlines that this is how the Tyco program can work best and it's how we are going to award the business." In the past, travel managers may have chosen airlines based on their core competency, i.e., such routes as Boston-Chicago or New York-Miami.
A year ago, Tyco began to expand its travel program outside North America and has since replicated its travel council model for other regions around the world where it has facilities—Latin America, Europe, Asia. To date, the councils also have consolidated travel agency spending with one supplier for each region.
Gaining compliance. Most important for Tyco—and any company consolidating its spending on travel agencies, air travel, hotels and car rental agencies—is a consistent policy, says Taylor. The policy doesn't have to be complicated, "but you really have to answer all the questions for the traveler, such as the meaning of the term 'lowest logical airfare'."
Tyco requires that its employees who travel use the policy (some companies mandate use) and recommends they use an online booking tool it implemented which tracks use of preferred suppliers. The tool, which displays logos of the company's preferred suppliers, is relatively easy to use, Taylor says. "If a traveler doesn't pick a preferred supplier, a box pops up, asking why, and returns him or her to the home page." The tool provides Taylor with pre-trip reporting data that she uses to monitor compliance.
Another way that Tyco tracks traveler compliance to agreements with its preferred suppliers is through its travel agency. Having consolidated its travel agency buy to one supplier means that the company receives one report on travel activity across the company. The travel council uses the data when negotiating agreements with airline, hotel and car rental agency providers.
The travel agency is not the only source the travel council uses to mine for data. "We found that we were missing some hotel and other ancillary charges," says Taylor, explaining that some employees such as salespeople or field technicians travel by car and often stay at a hotel for one night or switch hotels during a stay. "We wanted an extra layer of data so we mandated use of a credit card for travel and entertainment expenses." The travel council selected one card provided by Visa USA for use by Tyco employees who travel in the U.S. The company is now rolling out the program in Canada and Europe.
With travelers using one card, the travel council also expanded use of an automated expense reporting tool. Until then, many travelers were filing expense reports manually, using spreadsheets. The new tool downloads spend data daily from the card. Employees can do their expense reports online where managers can approve them as well. The audit group also checks the report by exception online. The tool makes it easier for employees and provides more control for Tyco, helping to speed up payment of its travel bills.
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