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4C Explores the Ground Transportation Market

Travel Newsletter June 2012

Ground TransportationWith companies looking to reign in expenditure, travelcosts are being scrutinised more than ever before. TheTravel Management Priorities survey 2012, publishedby Carlson Wagonlit Travel, revealed that more than60% of respondents consider reducing air and groundtransportation costs their top priority.

Ground transportation is the third largest element interms of expenditure in corporate travel budgets. Itencompasses rail, buses, coaches, taxis and the hire ofvehicles. Due to a fragmented supply base with lowtechnology adaptation, it is difficult for organisationsto identify spend in this area.

Travel management companies suggest that corporatebuyers carefully scrutinise their outlay on air fares andhotels, but have little knowledge of expenditure inother travel sectors. It is not unusual for somecompanies to have up to 30 suppliers of taxis andrelated services. Another issue is lack of enforcementwith regards to Travel Policy which means companiesdo not have an adequate level of detail regardingground transportation.

It is essential that businesses employ a holistic approachif they are to effectively manage the total cost oftravel. Improving compliance is essential and can beachieved by helping staff better understand onlinebooking processes, and mandating the use of preferredsuppliers. The latter is particularly important astravellers increasingly turn to mobile applications tomake bookings.

A wide range of tools can be used to support greatercompliance, such as car booking systems which improvevisibility on ground transportation spend.The next natural step would be to reduce costs throughsupplier consolidation and leverage spend throughpreferred suppliers.

Tools which support the sourcing and buying ofbusiness travel such as benchmarking, RFx’s andeAuctions will ensure travel buyers achieve theirtargets to reduce costs.

Using an eAuction to tender taxi services at a 4C client,resulted in more than 25% savings and animprovement in the service level.

Release cash Reduce cost Manage risk Improve ROI

T: +44 (0)20 7605 1600 E: info@4cassociates.com W: www.4cassociates.com

4C Associates has the insight, technology andexperience to drive rapid profit improvement.We offer specialist consulting, technology andmanaged services to transform your costs. Weapply industry and functional expertise to deliverexceptional benefits.

Our team works with leading organisations across arange of cost categories including Direct Materials,Services, Marketing, IT, HR, Logistics, SupplyChain, Property and FM. We apply deep practicalknowledge, combined with process and changeskills, to deliver reduced costs and increased profits.

To discuss how we can transform your costs pleasecontact us at:

Tel: 0207 605 1600Web: www.4cassociates.comEmail: Petra.urhofer@4cassociates.com

Case StudyA thorough review of the taxi spend of a major FMCGcompany was conducted by 4C. This spend amountedto a total of £250k per annum.

Objective:To reduce ground transportation costs and increasevisibility on total taxi spend whilst improving servicelevels.

Project Initiation:· Identifying relevant local and national taxi

services using current spend data and 4Cmarket knowledge

· Analysing spend and evaluating average costsof the most effective 13 routes and value-addservices

· Setting up the sourcing strategy and processesto conduct the review

· Engaging client’s senior stakeholders to gaintheir buy-in throughout the process

Process:4C conducted a full RFI and RFP process with 11suppliers, including the incumbent. The criteriaincluded agreement with the suggested terms, generalcompany information, account management &payment methods, fleet & drivers and indicative pricing.

Supplier responses were evaluated and six supplierswere selected to participate in the eAuction. TheeAuction was conducted by 4C in order to increase thecompetition among suppliers and speed up thenegotiations process.

The following steps were taken to run the event:

· Preparation – Test eAuctions were held to trainsuppliers to use the tool.

· Strategy – Cherry Picking Auction was selectedto encourage suppliers to compete in eachroute and to reduce their pricing on the keyservice items.

· Event Overview – Six suppliers bid for the keyroutes plus other value-add services in an eventlasting 30 minutes.

OutcomeThe two lowest bidders were selected for finaldiscussions to further evaluate the level of service eachcould provide as well as their suitability for the role. Afinal decision was then made and the supplier whichpresented the most effective service provision wasselected. Business approval was obtained with fullstakeholder involvement.

The sourcing process coupled with the eAuctionachieved savings of more than 25% of the annualspend and improved service levels through increasedprofessionalism and reliability.

Online AuctionsThere are advantages for purchasers and suppliers:

· The process is open and builds mutual trust· As it is a transparent process, it is based on fair

competition· Buyers and sellers have access to global

markets, irrespective of their location· The process saves time and resources, resulting

in reduced costs of procurement

Benefits for the buyer:

· The eAuction mechanism replaces time-intensive negotiations with suppliers

· Extends the supplier portfolio and increasescompetition

· Cost reductions in the procurement function

Benefits for suppliers:

· Cost reduction in sales function· Transparency and fair competition among all

suppliers· Access to wider range of customers· Better knowledge of the supplier’s competition

and market information