The ground transportation spend provides procurement more opportunity to reduce costs
By Susan Avery -- Purchasing, 12/11/2008 2:00:00 AM
With the slower economy and cutbacks in capacity by the airlines, demand for rental cars and black car limo service is starting to fall. At the same time, suppliers are coping with higher operating costs (such as trying to get rid of gas-guzzling SUVs in a down used car market) which is putting pressure on pricing. Upshot: It's a good time for buyers to negotiate agreements with suppliers.
This is especially true, travel industry experts say, if buyers have not looked at the ground transportation spend in a while. It tends to be a neglected category.
Take rental cars for example. Leveraging spending with one or two preferred suppliers and encouraging travelers to comply with company travel policy will provide new cost savings and efficiency benefits. (Recent consolidation in the industry resulting in expanded service coverage of car rental companies makes this possible.) What's more, asking travelers to purchase ground transportation services through a travel management company using an online booking tool can deliver even more results. Reporting data on spending can be used in negotiations with suppliers.
"To offset higher operating costs, we expect car companies to push through rate increases with new contracts," says Mathias Eichelberger, director of air and ground transportation for Egencia North America in Bellevue, Wash. "But if an organization can bring volume to the table, it will be in a very good position to negotiate for discounts."
Dave Kilduff, managing director of ground transportation at CWT Solutions Group—Americas in Minneapolis, says, "Simply managing the category and negotiating with suppliers will save regardless of what is going on in the marketplace." To compare prices offered by car rental companies, Kilduff suggests travel buyers take a total cost of ownership approach to the buy and remember to include all of a company's charges and add-on fees.
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