Business travel is an essential part of many organisations’ operations, but it often requires complex organisation involving several stakeholders and finance planning. That’s why businesses employ dedicated procurement teams who manage procurement for business travel and ensure that employees can travel in the best conditions at the best rate.
Often, procurement teams use business travel tools to streamline the procurement process and keep all the business travel information in one place.
So, what is procurement for corporate travel and what are the key aspects that businesses should take into consideration in their business travel procurement strategy?
What is procurement in business travel?
Business travel procurement is the process through which companies manage all their business travel-related activities. It involves sourcing suppliers, negotiating contracts, ensuring compliance with the company’s travel policy as well as developing and maintaining a good work relationship with suppliers.
This process can be managed by a procurement specialist or a procurement team, who tend to use business travel tools or external travel agencies to ensure the business travel management process is seamless. Smooth management of the process enables employees to go on business trips and have their flights, train journeys, rental cars and accommodation booked in due time.
Business travel procurement specialists need to research the best suppliers – such as airlines, hotels and car rental companies – and negotiate the best contracts to ensure cost-effective and efficient travel for the company’s employees. This process involves deep analysis to ensure that employees are in the best conditions to work upon arrival at their destination.
For employees, being able to pick the right flight or the ideal property to stay at is key to travelling for business comfortably and efficiently. The in-depth analysis should also focus on travel expenses to ensure that the most cost-effective solutions are chosen for the business.
Types of procurement
Based on what their needs are, a business usually employs different types of procurements. Procurement can typically be split into four main categories:
1. Direct procurement
This procurement type refers to the raw materials and products that a company needs to make, sell, and retail an end product.
2. Indirect procurement
This type refers to acquiring products and services that are required for a company’s operations but aren’t a direct contribution to the company’s product. Business travel costs and services, as well as marketing and consulting services, are examples of indirect procurement. Indirect procurement for corporate travel can include flights, accommodation, or rental cars, as these aren’t directly related to the company’s core production activities, but are essential to support overall business.
3. Goods procurement
This refers to the procurement of physical items and software subscriptions. The efficiency of the supply chain is essential to ensure goods procurement management. This type of procurement may overlap with indirect and direct procurement.
4. Services procurement
This refers to hiring and managing service providers, contractors or vendors that work for the company. It involves human resources services, marketing agencies, legal and accounting firms, etc. Hiring a business travel agency to cover business travel needs falls under this category. This type of procurement can also overlap with indirect and direct procurement.
All types of procurement necessitate good processes and strategies.
Business travel procurement process
Travel procurement management involves different steps that are necessary for a business to acquire the goods and services needed for employees to go on business trips.
This process can be broken down into six distinct stages:
1. Needs assessment
At this stage, the procurement team identifies the company’s travel procurement needs.
2. Market analysis
The procurement specialist compares different suppliers based on criteria such as price, reputation, the technology suppliers use, etc. The supplier can be a business travel agency or tool.
3. Negotiation and purchasing
At this stage, the supplier has been chosen and negotiation comes in. Some of the contract terms to be negotiated are the company’s budget, the contract duration and the terms and conditions.
The business integrates the new supplier into its workflow and internal processes.
The business pays for the goods and services thanks to an invoice-processing system that keeps track of orders, invoices and payments.
6. Performance review
The procurement team reviews the performance of the supplier and evaluates the quality of the goods and services procured.
Travel procurement strategy
Business travel procurement requires strong strategies in order to be effective. A successful business travel procurement strategy depends heavily on travel management tools or travel agencies. By working together with travel management tools or a travel agency, companies can streamline their procurement process, make better-informed business decisions and provide employees with better travel experiences.
How to choose a business travel tool for procurement?
Business travel tools play a vital role in a company’s business travel procurement strategy and help centralise all travel arrangements in one place. They support the strategy by offering features that can automate and streamline several aspects of travel management. Choosing the right travel tool will save the company some valuable time by making travel arrangements easier and keeping all the information in one place.
Here are some of the criteria to keep in mind when choosing a business travel management tool:
When searching for a business travel management tool, companies should make sure that it integrates with their existing company infrastructure, tools and platforms. This will ensure a smooth procurement process.
Is the tool’s interface user-friendly and easy to use? Or will employees and procurement specialists struggle to use it? The tool should also be compatible with mobile devices to be used on the go.
3. Booking feature
The booking options should be flexible enough and the supplier network wide enough. This will guarantee more attractive rates and the most comfortable travel options.
4. Travel policy integration
The tool should allow the integration of a travel policy to ensure that the procurement strategy respects the terms of the company’s travel policy.
5. Expense management
The tool should have an integrated expense management and reporting feature to ensure the procurement specialist gets access to all the big data related to the company’s business trips. Big data analytics can help identify patterns and trends in travel expenses and spot opportunities to save more money.
Does it have integrated business travel support to provide help whenever needed? Being able to contact support at any time is essential as a technical issue could heavily impact your company. Support should also be able to help with travel security alerts and clarify health and safety guidelines to facilitate the employees’ trips.
7. Data security
The tool will handle confidential data, so it’s essential to know if it uses security measures such as encryption or secure transmission protocols and if it respects data protection requirements.
8. Duty of care
Companies have to ensure the safety of their employees while they’re on a business trip. Business travel tools should help guarantee traveller safety by sharing important information such as travel alerts.
How to choose a business travel agency for procurement?
Along with choosing the right travel management tool, partnering with a business travel agency can further simplify corporate travel procurement. Travel agencies help with numerous aspects of travel procurement, including sourcing suppliers and negotiating contracts.
Here are some of the criteria to keep in mind when choosing a business travel agency:
1. Expertise and network
The agency should have expertise in procurement for travel and have an extended network to be able to source suppliers. They should have a good reputation for negotiating rates and discounts with suppliers and for working with travel policies to ensure that your company is respected.
The agency’s tools and technology should come with several features, such as a booking system to handle reservations efficiently, an expense management system and an analytics feature to support your company’s decision-making.
The agency should offer continuous and personalised customer support. They should also share travel information, security alerts and health and safety guidelines to facilitate the employees’ trips and overall travel experience.
4. Challenges of procurement in business travel
Procurement management for business travel can be complex and it comes with specific challenges.
Due to fluctuations in the travel market and the dynamic pricing of this industry, company travel expenses can vary greatly. Depending on the time of the year, specific events going on or higher demand, rates for flights, trains and accommodation can change. Procurement specialists need to be aware of market trends and be able to negotiate with suppliers to secure the best deals. Unlike procurement in other industries, travel procurement is highly dynamic and procurement teams need to adapt to an ever-changing world.
While pricing is often key in procurement, travel procurement professionals should also pay close attention to the employees’ ability to perform their tasks and make sure they comply with the travel policy. Is the cheapest flight early in the morning or late in the evening the best option from an employee’s point of view? Probably not. Making sure that employees reach their destination fresh and ready to work is just as important as finding a cost-efficient flight. Likewise, booking quiet accommodation in a convenient location may be more important than finding the cheapest hotel room or apartment in the city.
The main challenge for business travel procurement teams is to find the right balance between saving money and maximising employee satisfaction.
Effective business travel procurement is key to a company’s travel management. By developing a strong strategy, companies can optimise their travel-related expenses, streamline processes for better productivity and ensure employee satisfaction.