Driving Savings on T&E Spend: Philips Case Study
For many companies seeking areas to better control costs and drive bottom line savings, travel and entertainment (T&E) spend is high on the agenda. Organisations can make an incremental saving of 9% on indirect T&E spend and this can rise to as much as 26% in companies adopting best in class expense management practices or air, hotel and car rental.1
Some companies are specifically missing the opportunity to leverage spending power from their full air programme by ensuring their corporate card programme is fully implemented. This is often demonstrated by a lack of correlation between the percentage of air savings companies report and their corporate card air spend, which also means that companies may be missing out on the benefits of a corporate card, for example the extra air mile points.
Philips, the global healthcare, lifestyle and technology firm, implemented a T&E programme, and recognised both controlling and harnessing the spend on a consistent basis is critical to an effective expense management programme. With a presence in more than 60 countries, Philips has over 32,000 employees who regularly submit business expenses globally, representing annual T&E spend of €320m.
Philips aims to drive savings and value in their T&E programme, purchasing at the best price for their various business units and countries. With a large number of travelling employees, the greatest challenge is to track and manage a travel programme on a global level.
Their main objectives include:
In order to reach these objectives Philips has implemented a robust expense management process and is leveraging their corporate card data to maximum effect. This enables them to track and manage travel programme on a global level, negotiate better airfares and benchmark spend against other companies to ensure that they are getting the best value.
Philips used corporate card data and the expertise of the corporate card support team in the negotiation and implementation of incremental savings. A comprehensive assessment was carried out identifying the potential air, hotel and car rental savings opportunities available to Philips. This was accomplished by applying the understanding of Philips; business, analysis of Philips’ existing travel policy and compliance information, and data from the corporate card.
Following the assessment, recommendations were made which covered opportunities by geography, travel category, estimated savings ranges and suggested negotiation tactics.
The data analysis was used to reframe negotiations with suppliers and deliver savings beyond their original expectations and targets. The data and teamwork lead to a renegotiation of their airline portfolio and a significant reduction in the supplier base.
Regular tracking and management is crucial and ensures that the programme is constantly up to date, with any opportunities to drive savings becoming visible at an early stage as well as being able to quickly identify any out of policy spending.
The data that originates from employees1 transactions on the corporate ard enables Philips to have one single view of all travel spend that cannot be achieved from just consolidating data from its three main travel agencies. Philips values the higher consistency and completeness of information that its corporate data offers. The card data reflects actual transactions based on payments rather than just booked trips. This is extremely valuable for Philips’ procurement and finance teams. The distribution of meaningful data helps Philips’ business leaders manage employee spend resulting in a reduction of their overall cost.
Philips receives corporate card and benchmarking data for air travel on a quarterly basis, enabling regular comparison of spend against industry standards. This information and the methodology behind it has been recognized by Philips’ financial groups as a rigorous means of measuring and tracking savings. Philips has also integrated this into the business balance scorecard.
Philips has made an incremental 3.6% annual saving and has gained global insight and control through consolidation of all travel spend via corporate card data.
Management information delivers valuable information for Philips’ airline supplier negotiations and drives value from the companies air spend investment. The regular management information, combining data from around the globe, facilitates insightful recommendations in a timely and efficient manner.
1American Express Corporate Card Data Value Study 2007