Ardent Partners recently published our annual CPO Rising report (entitled CPO Rising 2014: Convergence) and of all the reports we publish this year, the focus of this report is exactly geared towards our regular readers (CPOs and those who aspire to the role). The report presents a comprehensive, industry-wide view into what is happening in the world of procurement and captures the experience, performance, perspective, and intentions of 273 Chief Procurement Officers and other procurement executives. As we do every year, we interview many Chief Procurement Officers (24 procurement leaders in total) to add context to this research effort. The report is available (with registration) from several sponsor sites including here, here, here, here, here, or here.
Procurement’s Convergence with Business Travel
Ardent Partners research pegs the business travel category as one of the top five indirect spend categories within the average enterprise, comprising between 8% and 12% of the an organization’s total spend. And, since business travel is generally considered part of the “cost of doing business” – particularly those with a global footprint – it remains a high spend category in both good times and bad.
During the economic downturn of 2008 and 2009, enterprises saw their business travel and entertainment expense budgets slashed, as it was viewed as a quick and easy way to cut costs. However, business travelers were expected to continue delivering high output despite smaller travel budgets. Advances in telecommunications may have eased some of their travel requirements and improved long distance communication and collaboration, but quality face-to-face time is hard to beat when it comes to driving business and fostering meaningful relationships.
When the economy began improving, travel budgets began to bounce back for some enterprises, but the recession had left an indelible mark on the way many companies manage business travel and expenses. Over the past five years, a majority of procurement departments (52%) have taken over the management of business travel, reflecting procurement’s greater influence in the process and its ability to drive greater business value. Ardent expects this number to continue to grow.
Advances in technology have also reshaped the playing field a bit. Financial management software’s convergence with travel and expense management software has enabled finance and procurement to link and automate previously separate, manual, back-office processes and fuse them with travelers and their front-line managers. Mobile platform adoption has taken it one step further, allowing faster processing and approval of itineraries and expense reports, or resolution in the event of a compliance issue or discrepancy. This increased adoption of automation has driven improved visibility into the spend data for most enterprises, providing them with a better, more accurate information regarding their business travel and expense spend and behaviors. Procurement teams can then leverage this information to driver greater strategic value by adjusting travel policies to better accommodate the business’ needs and the preferences of the corporate road warriors.
Below are a few recommendations for procurement to improve its management of travel programs:
Leverage spend analysis to understand travel spend and behaviors. Travel spend for most enterprises is significant, but it is controllable to a certain extent. By gaining visibility into the travel process and travel spend, procurement can better understand enterprise travel needs and behaviors and identify and contract with preferred suppliers to gain the best value for money.
Develop a clear and comprehensive travel policy; regularly communicate it and regularly update it. Whatever travel policy is established, measuring and monitoring policy effectiveness is crucial for maintaining compliance and cost reductions. Setting and clearly communicating spending guidelines, along with enforcing rules and disciplining non-compliant behavior, plays a key role in achieving comprehensive control.
Collaborate with finance to better link business travel with business results. A few years ago, there was a trend to focus on the ROI of an individual business trip. That movement fortunately lost momentum, but the need to drive business results from business travel has remained a staple of Best-in-Class programs.
Consider the traveler. Incorporate the opinions of the top ‘road warriors’ in the development and management of the travel policy. Travel inconvenience can have a real cost.
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Tagged in: Ardent Partners Research, Chief Procurement Officer, Complex Categories, CPO, Finance, People, Process, Spend Analysis, Strategy, T&E, Technology
