Who says procurement practices can’t work effectively for an SME? Hannah Bodilly of E&J Gallo has proven that it can. Gillian Upton explains Hannah Bodilly

IT software and hardware, mobile phones, facilities, HR, marketing and warehousing – they're all the same as buying travel, aren’t they? According to Hannah Bodilly, senior manager, European purchasing at US wine giant E&J Gallo, they are. She looks after the procurement of what are all the direct and indirect spend items at the company, including travel, and has done so for the last three years.

Despite a small travel spend of between £300,000 and £400,000 each year, she is managing it using procurement principles. Hannah has developed a travel policy, secured supplier deals, negotiated a service level agreement with her travel management company and most importantly for the company, is measuring and managing the risk of all travel-related third party suppliers that interact with the company and its 100 UK employees that travel on business.

A procurement specialist by profession, she has proven that procurement principles can work for a small or medium-enterprise (SME), although she does concede that when she took travel on as part of her remit she did struggle for a while.
“I went through the traditional purchasing routes and struggled because travel is not a one-off purchase, but a daily spec, with personal preferences, so it does make it more complex to buy. It becomes an emotional purchase,” says Hannah.

When she joined E&J Gallo there were no contracts in place, there was no travel manager to quiz and no travel policy in place. The various PAs dealt with the agencies so there was little or no management of the service or service levels. “I was thinking, ‘Who do I talk to?’ The travellers had their day job and there were lots of issues.”

She persevered, and went to the company’s TMC to find out about contracts, fees and service levels. Hannah inherited American Express as they were servicing the US parent company. “We had a basic call centre operation, with random service levels. It wasn’t their fault as we didn’t manage them or tell them what we wanted,” she says.

Hannah moved the call centre to another location where she received improved service through a dedicated team. She adds that she has a “brilliant relationship with Amex right now”.
Back then, the first thing she wrote was a 25-page travel policy, utilising templates from other companies. “I listed mileage rate, overnight rate, our travel and entertainment (T&E) policy and so on. I got airline deals in place, with BA and Virgin, and took a harder line with hotels and got better rates and a single point of contact across the chain.”

The company books between 400 to 500 room nights per year and approximately 500 flight sectors per annum. Travel is principally to the company’s European sites in Germany, Netherlands and the Nordics, as well as to company headquarters in Modesto, California.

The deals didn’t come automatically with suppliers. “Once they know our size, suppliers tell us where we fit into their rate matrix,” she explains. But she advises not to underestimate your leverage with suppliers. “We might have a small spend but we’re a big brand, and some suppliers may like the brand and want it in their portfolio. Some suppliers don’t want large companies.”
The other major under-taking was to put in place contracts with all suppliers. “Price is not the only measurement of procurement,” she says. “I struggle with quoting savings as I’m not in control of how much people travel, but I know there are savings there.

“What we can measure now is the risk and we can terminate any agreement if a supplier fails. In that way we have mitigated risk and that’s a huge improvement on having no contracts when I joined.”

Hannah has spent a disproportionate amount of time on travel procurement, but has learnt the ropes in the process. It takes up 20 per cent of Hannah’s time despite it being only five per cent of her total procurement spend.

“I started to understand how complex it was. Travel is different. It touches everybody and they all have an opinion and preference. It’s also a very emotional purchase and travellers want to feel they have a choice.

“Externally, a lot of procurement principles hold true, but internally it’s much harder dealing with the actual travellers,” she admits. 

“They don’t all follow my policy to the letter and we don’t have pre-trip authorisation,” she explains. “That’s a controlling step we won’t take right now.”
By next year, however, E&J Gallo will have an online booking system up and running and that will bring with it pre-trip authorisation.

What is procurement?
Old-style procurement managers were process managers and usually risk averse but, according to Roy Ayliffe, director of professional practice from CIPS (Chartered Institute of Purchasing & Supply), today’s procurement personnel are market aware, financially astute, good communicators, risk managers and value generators.

“All procurement comes down to four key processes,” Ayliffe explains. “Strategic sourcing analysis, proactive demand management, acquisition pre-contract and acquisition post-contract.”

THE PROS AND CONS

The Pros
1. Whatever your size, you can leverage your spend. Don’t take the “I’m big, you’re small” attitude from them

2. Managing risk is comparable with cost savings

3. Managing travel means you’ll have a degree of control

4. Travel touches everyone so if you do a great job everyone is happy

5. It can be fun dealing with agents, airlines and hotels!

6. It is definitely a learning process – there is a lot to learn and it can be a challenge at times

7. A huge impact can be made by attempting to negotiate an area previously untouched – with airline deals, hotel deals and agent service level agreements

The Cons
1. Daily changes from suppliers are difficult to manage

2. The level of complaints from travellers is always a factor, often because of the airline and hotel loyalty clubs they belong to, and because they see travel as a benefit of the job

3. It’s time-consuming for managers

4. Controllable only at the back-end of the process

5. Competition between suppliers

6. It can be difficult to negotiate with suppliers when you are not the day-to-day buyer

THE BLUEPRINT FOR SUCCESS

1. Develop a travel policy

2. Have policy mandated from above

3. Make sure all spend is channelled  through the TMC in order to generate data. “After three months I had a huge lump of data,” says Hannah

4. Use that data as leverage with suppliers and do deals with hotels and airlines

5. Introduce pre-travel authorisations

6. Manage all your outsourced relationships

7. Have expenses controlled and rejected when outside policy

8. Use your TMC for advice

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