Operations

Reader's Digest Association Pares Down Roster of Limousine Suppliers

Posted on October 8, 2008 by LCT Staff - Also by this author - About the author

PLEASANTVILLE, N.Y. – After discovering that employees used more than 100 different limousine companies, Pleasantville, N.Y.-based Reader's Digest Association pared that roster first to 10, then to three. During the consolidation, the company reached out to noncompliant employees to increase adoption rates and used historical data to drive additional savings.

Director of corporate purchasing Joe Siciliano hopes 80% to 90% of the company's limousine bookings will be with the three preferred vendors by year-end, and hopes to realize 17% annual limo program savings by next June, the end of the company's fiscal year. The company made more than 5,500 reservations in the last fiscal year.

While using the three limo companies is not mandated, travelers booking nonpreferred vendors are informed of the new program, and if they continue noncompliant bookings, letters will be sent first to their manager, then their business head.

When consolidating from 100, Siciliano began to drive employees to the company's top 10 vendors. "It wasn't anything other than taking the top 10 because the tail was so long," he said. "I said, before I make you a preferred and put you on our website, I want some discounts from you right off the bat. Then know that in three to six months I'm going to probably run an RFP that you may or may not win. In the interim, put your best foot forward."

All 10 complied with Siciliano's request, while he worked on driving travelers to their new preferreds. "The adoption rate was slow in coming," he said. "Through conversation, by seeing the leakage, I continued to change the behavior month over month."

If a traveler used a nonpreferred company, Siciliano would show them the difference in price between it and a preferred company, and "many of them would jump over."

By June, as the request-for-proposals process began, preferred supplier adoption was in the low 70% range.

During the RFP process, Siciliano asked the 10 vendors to offer competitive pricing. However, he also asked about vendor service at all Reader's Digest corporate locations in the country. "We wanted to make sure they either had the bandwidth to deal with the country or had an affiliate to deal with it."

Reader's Digest initially saved 12% through the RFP process, then chose three vendors as preferred suppliers. Siciliano then provided them with information about employee travel patterns.

"We talked about how the pricing model would change if they knew the habits of all our travelers," he said. "Here's our profiles of our people, put them in the system and give me better pricing. I gave them last year's data and said, here's where the people are, here's where they live, here's where they've traveled, give me the best pricing you can."

One vendor, after being presented with the data, reduced pricing another 5%, and other agreements were pending.

In order to facilitate the transition and ensure service levels, Siciliano informed the vendors that they would transport two business unit heads, telling them to show why they were chosen as one of the three preferreds, but to know that they would have to offer that level of service to everyone. "Whatever you do for them, you're going to continuously have to do because you're setting an expectation," he said.

In the beginning of October, the company also began allowing limousine bookings through its travel agency's self-booking system.

By next month, Siciliano plans to present the savings figures generated by the initiative to the company's executives, as well as evidence of the financial impact of limousine policy noncompliance. "I drive that back to the CFO and the leaders on the business and say, here's the opportunity you had, this is the leakage you had, had you not had that, you could have saved this much money."

Source: Business Travel News

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