Business & Technology Nexus

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Under The Microscope: Corporate Travel

with one comment

After reading another one of Jason Busch’s post, this time relaying the trials and tribulations of flying to China, I was reminded of the enigmatic Travel Spend Category.

At Oracle, we used a service we had created and then spun-off called e-travel. It was pretty awful (perhaps Amadeus will fix it eventually). Not surprisingly, e-travel wasn’t connected in the slightest to the rest of Oracle’s procurement systems, even though the Purchasing department was in charge of managing travel spend. And us senior folks had an entirely different process to follow than all other employees. Yes, with Travel all the normal rules around procurement seem to be suspended. Source for best value, no. Operate from a budget, no. Spend first and ask questions later, y-e-s!

With Travel, expenses come in as a disturbance to cost centers. They are rarely anticipated. A manager’s only tool to control costs is to threaten to not approve. But having been there before, having stared at a $10,000 expense report that should have been closer to $6,000, it is incredibly tough to do & is rarely (if ever) done. Instead, the company eats the expenses and the employee gets a stern warning. And lack of clear policies and expectations are to blame.

The central dilemma I always found with travel as a spend category was how airline reservations worked. A fundamental concept within Procurement is pre-approval, and with travel it’s very difficult to do effectively. Airline prices change too quickly – by the time a trip is approved the airfare may have changed significantly. Corporate policy on fare class is equally a problem. Some companies choose to bet on non-refundable fares in the hopes that trips won’t change or be cancelled too often. Some stick to the always-refundable, always-expensive “Y” class (“Y” am I paying so much more than every else?). These are difficult questions where reasonable people come to very different conclusions.

Hotel and car rental don’t suffer from the same pace of pricing changes as airfare. But they get lumped in for the convenience of today’s booking systems. After all, they are a part of the trip!

So, now that I’ve described some of the challenges, I’ll make two recommendations. #1, please implement a “trip budget” pre-approval process. Make sure you set boundaries on anticipated spend. And although this seems like an LOB action, the Procurement department can help by drafting travel policies friendly to LOB cost centers. #2, consider incenting employees to save money by allowing them to participate in the upside. A reasonably-set Per Diem can change employee behavior from Room Service and the Mini Bar ($35/dinner) to something that is tastier to the palate and to the budget.

Travel is a big problem and I’ve got a few more thoughts. Let’s continue the discussion next post.

p.s. There is a nice Aberdeen report on procurement & Travel you might be able to find if you do a google search on “category spend by industry” :)

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Written by Dave Stephens

02/26/06 8:09 AM at 8:09 am

Posted in Opinion

One Response

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  1. Nice blog. Visit our website also.

    UTAN

    01/26/07 7:06 PM at 7:06 pm


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