ISM Travel & Events 2017June 12-17, 2017

Miami, FL

Pam McTeer Senior Consultant, GoldSpring Consulting Pam, Senior Consultant at GoldSpring Consulting, an independent travel management consultancy, brings more than 30 years of experience in corporate travel and meetings/event management.

Pam joined GoldSpring in March of 2017 to work on select projects and consulting engagements, specializing in global procurement, category

management, strategic sourcing, meetings and events, corporate travel and Strategic Meetings Management Programs (SMMP). She draws on her experience with global Fortune 500 corporations such as Coors, MolsonCoors, MillerCoors, Ball Corporation, First Data, Coca-Cola and supplier experience with some of the top TMCs and meetings and events companies.

Chapter 2: After the Sourcing…..Managing the Travel Category

After the Sourcing…

• What’s Next?• Let’s keep our pulse on the global travel

and meetings and events category.• Work the supplier agreements – Don’t put

them in a drawer until the next sourcing event.

• Understand the company’s demand and impact to purchasing.

• Partnership with preferred partner suppliers is critical.

• Success – More effective sourcing, fewer meetings and better alignment with the business = Category Management is on the rise!

What is Category Management?

• Category Management enables:

• Company to tap into valuable expertise and experience (category/sourcing lead) to identify greater category negotiating leverage

• Transition from “event driven” sourcing and tactical procurement to a strategic category approach through the lifecycle of the category tapping into a dynamic approach to strategic sourcing methodology

• Streamlined processes

• Fewer meetings & empowering decision making

The Evolution to Category Management

Event Driven Strategic

Sourcing

Strategic Category Management

One-off sourcing projects and

engagements driven by an “event” – such

as contract expiration

Proactive and interactive management of an

entire category. Continuously building

savings and delivering additional

benefits/value creation

Bottom-up approach based on spend data Top-down approach based on business

strategy

Projects priorities by savings volume and

ease of implementation

Projects prioritized by savings volume and

adjusted business (PI) impact

A focus on the initial contract, its execution

and savings strategy

Ensures contractual benefits are realized at

both execution and through the life of the

contract

Ad-hoc category analysis to support

specific projects and engagements

Continuous monitoring of the market and

supplier performance by experts who know

the category and the supplier base

Ad-Hoc communication with stakeholders

and suppliers as required

Structured and open lines of communication

and reporting with business owners and

suppliers

From driving event driven savings… To driving strategy and transformation

Category Strategies should direct the majority of sourcing events.

Category Management

Top Line Business

Aspirations –Phase 1

Market Intelligence

Category Strategy

Demand and Supply

Management

Contract Management

and Risk

SRM/Strategic Sourcing

Event

Monitor the impact of

the supplier cost drivers

based on market and

industry trends –

Phase 1

Leverage your

opportunities and

processes

Phase 2

Visibility of spend,

impact of demand,

cost drivers, supplier

capacity – Phase 2

Ensure Contractual

obligations are met and

manage risk including

continuity and financial

– Phase 3

Monitor Supplier

performance and

potential 7 Step

Strategic Sourcing

Process

Phase 4

Category Management Process

Could be thought of as a “Dynamic Strategic Sourcing Process”

Phase 1 - Category Prioritization and Assessment

Ad-hoc spend analysis to support specific

projects/engagements

Inconsistent ways to validate spend

Various methods to obtain spend data

Current State

Implementable process to push category spend out to

category managers

Documented process to validate spend

Documented process to obtain spend

End State

High Level

RACI

Step No.Team Member

Activity

Bu

sin

ess

Ow

ner

Pro

cure

men

t C

ateg

ory

Le

ad

Pro

ject

M

anag

er

Lega

l/R

isk

Op

erat

ion

s

Fin

ance

Exp

ense

M

gmt

Div

ersi

ty

1.0 CATEGORY PRIORITIZATION and ASSESSMENT

1.1Identify Categories/Sub-Categories A R I C C C C I

1.2Gather and analyze spend information A C I C C C R R

1.3Compile relevant information into a standard report template

A A I C R C C C

1.4Consolidate spend information into a single source to aid buyers/business in developing a strategy with one source of truth

A C I C C R C C

1.5 Develop an implementable process to monitor and assess spend information

A R I C C C C C

Roles & Responsibilities

Task Role How

Sponsor • Remove Category Management barriers,

allocate resources

• Participate in periodic progress updates

• Email and conference calls as

needed

• In-person and live-meetings with

Category Management objective

sub-team

Team Lead • Accountable for objective success

• Prepares meeting agendas

• Launches sub-teams for each development

phase of the Category Management

playbook

• Develops RACI and timeline

• Communicates status to Leaders

• Bi-monthly team meetings

• Status Reports

• Meeting notes

• Facilitate development of

collaboration site

Team members • Contribute to agenda preparation

• Attend appointed meetings

• Communication of status of issues/initiatives

to whole team

• Determine actions, tools & templates

associated with each phase of the Category

Management Playbook

• Updates during bi-monthly

meetings

• Communicate via defined

collaboration method

Program Leaders • Provide feedback to sponsor and Team Lead

• Refine program as needed

• Indirect Staff meetings,

conference calls

Development of standardized processes and a structured set of activities is

necessary for sustainable procurement outcomes including increased

Savings, cost avoidance and improved processes. Providing category

managers with consistent, repeatable practices will enable managers to

assess, plan and execute well-thought out category strategies.

The Category Management team will develop a Category Management Playbook which will

be housed on an internal SharePoint site. The Playbook will consists of the 4 phases below.

Phase 1: Category Prioritization and Assessment

Phase 2: Category Strategy Development

Phase 3: Category Plan Deployment and Implementation

Phase 4: Results Tracking and Reporting

A category ownership scorecard will be developed to measure success.

Indirect Procurement categories

Recreating existing tools and processes associated with the 7-

Step Sourcing Process is not in scope

Project Overview / Background Business Case / Case for Change

Goal Statement

Project Scope

Team Resources

Timeline / Milestones

Date: June 2017

Most sourcing today is event-driven. Category Management will enable the transition from

event-driven sourcing and tactical procurement to a strategic category approach. Category

Management will also enable ABC to capitalize on the experience and expertise of category

managers thereby creating greater negotiation leverage.

Phase/Milestone Jan Feb Mar Apr` May Jun Jul Aug Sep Oct Nov Dec

Phase 1

Task 1

Phase 2Task 2

Phase 3Task 3

Phase 4Task 4

Scorecard

DevelopmentTask 5

Role Name Function

Sponsor Senior Leader G&A

Team Lead Professional Services

Team Member Subject Matter Expert

Team Member PMO

Team Member Marketing

Team Member Finance

Team Member Audit

Team Member Analytics

Problem Statement / Opportunity Statement

While cost pressures on the business continue to increase, Indirect Procurement’s ability to

generate savings in the same categories diminishes over time. Therefore well-defined

category management is required to continue to drive/sustain savings.

Project : Category Management Charter

Category Management PlaybookPhase 1: Category Prioritization and Assessment – Vision and Market Intelligence

Category Management

Top Line Business

Aspirations –Phase 1

Market Intelligence

Category Strategy

Demand and Supply

Management

Contract Management

and Risk

SRM/Strategic Sourcing Event

• Activity Description

• What is the mission statement

• Collect macro and micro-level market intelligence relevant to the selected category

• Objective

• Identify key market indicators that predict material changes to costs, availability and or supplier performance within a category.

• Identify spend in market its anticipated growth over the next 1-5 years, competition and

specific dynamics

• Process Overview

• Category owner research macro- and microeconomic information to better understand current category trends as well as to identify key indicators that will help predict market changes in the future.

• Tools/Templates

• Wall street analysts reports on industries and suppliers, 10K and annual reports

• Research suppliers: BTN, Smith Research, Gartner, AMR Research, Dataquest, Forrester,etc.

• Industry publications, associations, general internet research

• Templates: SWOT, Porters 5 Forces

• Participants

• Category Team – Sourcing Lead and Business Owner

• Deliverable

• Short term and long term category sourcing strategy

Category Management PlaybookPhase 2: Category Strategy Development – Demand and Strategy

Category Management

Top Line Business

Aspirations –Phase 1

Market Intelligence

Category Strategy

Demand and Supply

Management

Contract Management

and Risk

SRM/Strategic Sourcing Event

• Process

• Cadence on tracking spend and compliance to business requirements

• Activity Description

• To collect, analyze, and validate companywide category spend information and document business requirements

• Objective

• The why

• Process Overview

• The how. What will I need to do to collect the data elements?

• Tools/Templates

• What are the tools and templates I need to use?

• Participants

• The who. Category Team – Sourcing Lead and Business Owner

• Deliverable

• What is the outcome?

What Occurs in Category Strategy?

• Define category spend and current state.1

• Define business needs.*

• Define industry or industries and dynamics2

• Explain industry and demand lifecycle3

• Assess the competitive market**

• Breakdown spend4

• Assess risks and opportunities***

Supplier

Spend

($M)

Date Last

Sourced

Key Supplier Notes

and Comments

Supplier Conversion, $489, 89%

Ancillary Air Cost, $59,

11%Net Air Cost

Ancillary Air Cost

Market Competition

Barriers to Entry

Buyer Bargaining

Power

Threat of Substitutes

Supplier Bargaining

Power

Porter’s Five

Forces

Category Management PlaybookPhase 3: Category Plan– Contract Metrics and Compliance

• Process

• Monitoring the performance of the contract SLA/metrics and compliance

• Activity Description

• To collect, analyze, and validate performance metrics and compliance

• Objective

• The why

• Process Overview

• The how. What will I need to do?

• Tools/Templates

• What are the tools and templates I need to use?

• Participants

• The who. Category Team – Sourcing Lead and Business Owner

• Deliverable

• What is the outcome?

Category Management

Top Line Business

Aspirations –Phase 1

Market Intelligence

Category Strategy

Demand and Supply

Management

Contract Management

and Risk

SRM/Strategic Sourcing Event

Category Management PlaybookPhase 4: Results Tracking and Reporting

• Process:

• Proactive reporting results of sustainable category management with business partners

• Activity Description:

• The scorecard report out on goals and managing and monitoring the category

• Objective

• The why

• Process Overview

• The how. What will I need to do?

• Tools/Templates

• What are the tools and templates I need to use?

• Participants:

• The who. Category Team – Sourcing Lead and Business Owner

• Deliverable:

• What is the outcome?

Category Management

Top Line Business

Aspirations –Phase 1

Market Intelligence

Category Strategy

Demand and Supply

Management

Contract Management

and Risk

SRM/Strategic Sourcing Event

Category Pillar Example (SMART Goal Examples):What is a Category Strategy Pillar? - A SMART goal defining key actions to assure a competitive advantage in the category.

“Bad Pillar”:

Improve quality on Airline in North America.

“Good Pillar”:

Improve can yield from a 99.45% system average to a 99.75% target across ABC by completing 6 joint kaizen events with ABC Company per year throughout the current contract term.

“Bad Pillar”:

Increase competition in North America.

“Good Pillar”:

Increase competition in North America by completing an e-Auction on Hotel for volume available as of 1/1/2017. Qualify new entrants where justified by supplier bidding and a minimum of a 5% reduction versus current incumbents. Provide contingent allocations to any non-qualified suppliers pending successful qualification by 2016.*

Example of Category Management Review

Example: Global Travel Category Strategy Overview

Scope of category encompasses goods and services to support corporate operations including Airlines, Corporate Aviation, Hotels, Car Rental, Credit Card (Travel and Purchasing Card), Ground Transportation, Parking, Travel Management Company/Online Booking Tool/Data Consolidation, and Strategic Meetings Management

Airline, $112, 59%

Corporate Aviation, $5, 3%

Hotels, $50, 26%

Car Rental$5, 3%

T&E Card$1, 1%

P-Card, $1, 1%

Ground Trans., $2, 1%

Parking, $1, 0%

TMC/Online/Data, $5, 2%

Strategic Meetings Mgmt,

$7, 4%

Annualized Total Spend $M $208

Spend with Contract Expiring in 2016 $M $96

# Suppliers (2016) 179

Subcategory Spend Breakdown

Definition

2016 Category Highlights

Overall Highlights:

• Team has addressed approximately $200M across 10+ subcategories and 179+ preferred suppliers.

• 7 completed initiatives, will be delivering ~ $9M in 2016 cost improvements

• 1 outstanding initiatives, will be delivering ~ $.100M in cost improvements

• Expanded stakeholder engagement within SPM environment

Project-specific Initiatives

Completed• Global Airline RFP - $3.9M cost savings• Regional Travel Agency RFP - $.100M cost savings• Global Hotel RFP - $1.4M cost avoidance• Events/Meetings Supplier Consolidation - $.017 cost savings• Corporate Aviation - - $.500M cost savings• Travel and Entertainment Card - $1.35M cost savings (rebate)• Pcard - $.900M cost savings (rebate)

Outstanding• Travel Agency RFP – MENA/ASIANA/INSWA - $.100M cost savings

Business Unit Spend Breakdown ($M)

$104 $86 $9 8.9 0.68

$0 $50 $100 $150 $200 $250Global US Canada LATAM EU

3-Year Category Strategy Summary

Subcategory

Spend Details

High level Opportunity AreasAddressable

Spend ($MM)Volume

Projections # of SuppliersLow Savings Range

($M)High Savings Range ($M)

Global Airlines17: $112M16: $123M17: $135M

22 Contracted17: $2.2M16: $017: $0

17: $5.6M16: $017: $0

• NESR over last contract• Reduce ancillary fees • Drive waiver/favor reductions

Corporate Aviation17: $5.0M16: $5.5 M17: $6.1 M

12 Contracted17: $0.250M16: $0.275M17: $0.306M

17: $0.500M16: $0.550M17: $0.610M

• Increase contract velocity• Increase understanding subcategory• Become trusted partner

TMC/Online Booking/Data Consolidation

17: $4.7MM16: $4.2MM17: $4.0MM

17 Contracted17: $0.10016: $0.25017: $0.200

17: $0.10016: $0.50017: $0.300

• Reduce transaction fees• Drive greater data visibility• Better leverage supplier spend

Travel and Entertainment Card

17: $450M16: $495M17: $545M(Pass through)

1Contracted

17: $1.1M16: $1.1M17: $1.1M(Rebate)

17: $1.6M16: $1.9M17: $2.4M(Rebate)

• Consolidate ABC Company where possible• Drive greater usable and visible data• Better leverage supplier spend• More expansive global merchant acceptance (bank

cards)

Broad Category Observations & Market Intelligence

• Global Travel - Per unit travel costs largely a function of overall, big picture macro economic conditions , currently experiencing upward pricing pressure

• Global Travel - Supply and Demand are often skewed due to large capital investment requirements (airplanes, hotels, car)

• Corporate Aviation - primarily a business tool.. Procurement has limited influence on supplier decisions, therefore savings are incremental

• Global Travel Management Companies - now have wholly owned, offices or affiliations affording “global” coverage, accurate global data remains

• challenging

• Credit Card – market is changing , suppliers looking to lower distribution costs by cutting/eliminating merchant fees. As world globalizes, merchant acceptance of credit card is critical

• Global airline - consolidation driving need to potentially exclude airlines/alliances from preferred program to maximize savings opportunities

Example: Category Strategy Overview

$104 $86 $9 8.9 0.68

$0 $50 $100 $150 $200 $250

Global USA Canada LATAM Consolidated

Delta Airlines, $38.1, 68%

British Airways, $5.5,

10%

Air France, $4.9, 9%

Lufthansa, $4.3, 8%

Korean Air, $3.1, 5%

Top Five Suppliers (By Spend)

SupplierSpend ($M)

Date Last Sourced

Supplier Categorization

Delta Airlines $38.05 06/2012 Strategic

British Airways $5.49 06/2012 Leverage

Air France $4.93 06/2012 Leverage

Lufthansa $4.34 06/2012 Leverage

Korean $3.08 06/2012 Leverage

2016 Commodity Spend Breakdown ($M)

Top Contracts Expiring in 2016Expiring Contracts Spend ($M)

Delta Airlines $38.05

British Airways $5.49

Air France $4.93

Lufthansa $4.34

Korean $3.08

Subcategory Spend Fragmentation1

Total Annual Spend $112MAddressable Spend: $82M (72%)Managed/Influenced Spend: $0 (0%)Supplier Diversity Spend: $0 (0%)# of Suppliers: 22

Product Supply SystemProcurement Operations

PartnersAccounting

The ABC CompanyStrategic Relationship Marketing

Supplier Diversity

North America Group Global Travel Management

Meetings & Events ManagementShared Services

SafetyFinance

Integrated Marketing Communications 0%

20%

40%

60%

80%

100%

% o

f T

ota

l S

pen

d

% of Supply Base

1Pareto includes only top 17 carriers; $28M in tail spend suppliers not represented

Example: Global Airline Subcategory: Overview

Primary Business Partners

Business Strategy and Goals

The global airline strategy is to maximize airline discounts and global coverage, minimize overlap and ancillary fees, while ensuring

alignment with current market conditions and corporate travel policy.

Incorporate global spend into overall spend by presenting compelling value proposition to both airline providers regions. This will

comprehensively include the ability to drive savings and while gaining commitment their compliance to preferred airline contracts and

programs; thus demonstrating to airlines our capabilities to control and manage spend.

Ability to drive savings in this category is critical to reduce overall costs as airline expenditures average greater than 40% of overall travel

and entertainment expenditures.

Example: Global Airline Subcategory: Internal Business Needs Overview

Total Cost of Ownership

Diversity

Customer Service

Quality

Growth/Innovation

Sustainability

Safety

Long-Term Cost Advantage

Increase NESR (Net Effective Savings Rate) by a minimum of 2% contract over contract.

Tier 2 supplier reporting to be made available

On time performance Minimal baggage mishandling Courteous airline staff interaction Timely notification should flight delays occur

On time performance metrics A0, A17 to be reported with monthly/quarterly/annual reviews. Measure uncontrollable (weather) versus controllable.

Look for potential direct connect opportunities to lower distribution and transaction fees

Develop tools to improve traveler productivity and satisfaction while traveling.

Will be able to provide CO2 consumption levels

Must have documented recovery plans on file.

Airlines will maintain certificates with designated governmental authority in their flag country. For example, the FAA in the United States.

Air fares will rise and fall due to economic conditions, fuel costs (major driver) and supply and demand. We will outperform the market to gain competitive advantages.

Issues/Risks

Airlines have merged into 3 major global alliances Contract compliance is critical. Airline contracts rarely

allow for more than two preferred global alliances due to market share requirements.

Upward pressure on pricing as airlines have reduced capacity creating demand pressure on supply.

World geopolitical instability drives fuel increase pricing and cannot be controlled by airlines or customers.

General Context &

Market Dynamics

• Increased competition in HQ market• Low cost carrier expansion in several regions• Visibility and leverage of regional spend• US agency consolidations LATAM, Europe,

Africa• Business class policy attractive to carriers• Ongoing travel policy review

• Customer relationships• Reduced spend from previous sourcing event• Monopolistic and carrier dominant markets• Airline/Alliance consolidations • Yield Mgmt: high loads, limited capacity• Carriers demanding increased compliance to

contractual market share commitments• Fuel – price volatility; not discounted

Opportunities & Market Potential

SkyTeam (Delta led), Star Alliance (United led), OneWorld (American led) global alliances?

Major carriers lead increased pricing increases due to oligopoly environment.

KO loses leverage due to philosophy or reciprocity. Our airline contacts benchmark at 5% below best in class.

Market Players /

Competitors

Regulatory barriers regarding foreign/domestic ownership of airlines still in place, but softening.

New runways/airports difficult to build and timeframe from concept to completion can exceed 25 years.

Unaddressable spend: Airline industry heavily taxed; ticket prices include hidden taxes totaling as much as 35%.

Regulatory Context/

Issues

Example: Global Airline Subcategory Strategy: External Environment Summary

Example: Global Airline: Action Plan

Strategic Plank Strategy Statement Project Name/Description

Star

t D

ate

End

Dat

e

Co

mp

lexi

ty(H

/M/L

)St

rate

gic

Imp

ort

ance

Savi

ngs

Op

pty

($

M)

Engaging and influencing the market, Best-cost country

sourcing,etc.

We will maximize airline discounts and global coverage, minimize overlap and ancillary fees, while ensuring alignment with current market conditions and corporate travel policy.

Global Airline Sourcing Initiative 5/17 12/17 H H $1.8M

DtV, Scope/Spec Optimization

Supplier performance, development, collaboration

Influence controllable on time and arrival metrics.

DOT Arrival and Departure Metrics 1/17 12/17 H H $0M

Process, operational efficiencies, P2P

Measure traveler satisfaction, leveraging data from commercial relationship.

Airline CSAT Surveys and Feedback 1/17 12/17 L M $0M

Internal resource and support enhancements,

“Make vs Buy

Minimal on normal travel. Corporate Aviation for leaders.

Commercial Aviation / Corporate Aviation 1/17 12/17 M M $0M

Targeted 2016 Spend to Address $82M Targeted Annual Savings $1.8M

Spend Addressed YTD $82M (100%) Savings YTD $0M (0%)

Strategic Sourcing

Value Engineering

SRM

OE / Process / Systems

Internal Org & Infrastructure

Example: Global Airline: Market CategorizationHow ABC Company Views the Markets

Sourcing Choice Model

Su

pp

ly M

ark

et

Co

mp

lex

ity/R

isk

Su

pp

ly P

ow

er

II. Risky Bottleneck – worst place to be Can we reduce the risk? Can we simplify the item or its use? Can we grow its volume? Can we exit the use of this item?

HighLow

Lo

wH

igh

Volume / Spend / Potential Opportunities (Business Impact)

Demand Power

IV. Critical - Strategic Differentiator. unique items / services that drives the business

These items must be both leveraged and managed to deliver value (benefit/cost).

III. Commoditized - Leverage

Items /services that are important because of economic importance and size

Leverage market knowledge, size, and simplicity

Use competition and put in place the infrastructure necessary to leverage competition – simple specs, rapid qualification procedures, and rapid decision making

Incremental volume discount seeking

Aggregation / consortium with others to leverage larger volumes

IIManage,

Grow, or Exit

IVAlliance,

Collaborate, Leverage

IOutsource or Discontinue;

Increase Efficiency

IIICompetition,

Maintain multiple Suppliers

I. Non-critical - Routine

How can we dramatically reduce the time and effort spend here, yet ensure best price to deliver low total cost and low cash flow?

Outsource to a third party purchaser (e.g. contract buyers, distributors) to aggregate our small volume with other buyers with monitored success criteria.

Select a supplier and put on automatic pilot—catalog buying via e-commerce.

“Insource” to the consuming department, consult with them but let them manage the buy.

Automate transactions as much as possible.

“Informational”

Sourcing strategy is a combination of Strategic

and Leveraged

Why is Category Management Important?

• Key input for annual business planning

• Next step in Procurement transformation.

• Enables:

• Faster and streamlined processes and approvals• Industry benchmarks represent 35% reduction in efforts to source.

• More effective strategies • Short-term actions to drive value and eliminate risks.• Long-term actions to assuring KO competitive advantage.

• Reduced meetings• Category Strategy Review cadence.• Consolidated Sourcing Events based on approved Category Strategy

Review.

• Improved role transitions • Stored documents containing critical category information.

• Standardized processes and training across towers.

• Improved Business Partnership• Internal and external.

*APQC 2016; Procurement Category Management: Faster Purchase Order Cycle Time

How to standardize?

26

• Define the category

• Category Complexity Assessment – Sub-categories

• 7 Step Sourcing

Activity Description

• Category Strategy Template

• Tasks and tools will vary depending upon complexity

• Repository of information – share point

• It is a “living” process

• 7 Step Tools

Standardization: define measures and tools

• Owner of Category

• Business Partner

• Procurement

Participants - Ownership

Measuring Success

• Objectives: • Holistic and dynamic view of performance to

objectives

• Mechanisms for Measurements: • Category Management Scorecards• Category Performance Summary

• Timings/Frequency: • Documentation of performance at least quarterly• Reviewed with Leadership and internal

stakeholders

• Evaluation/Outcomes:• Partner/Supplier coaching programs with mutual

objectives• Period peer reviews

Q&APamela J McTeer, CTC, CCTE, CPM, GTP

Senior Consultant

GoldSpring Consulting LLC

Cell (720) 234-6472

pam@goldspringconsulting.com

www.GoldSpringConsulting.com