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Air optimization - case study

Maximize ROI with negotiation power index and data tools

Industry:

Professional services

Scope:

Global

Results at a glance:

Annual savings versus the baseline of $84 million USD totaled $4 million USD
Net effective discount savings increased overall from 17.8% to 18.7%

Challenge

A global professional services company faced an unusual dilemma... how could it make its airline contracts, which were already superb, even better. With an annual travel spend of over $500 million USD, the company has used its strong position over the years to secure top notch contracts with carriers, so the challenge was whether any further savings could be gained.

As a long-time client of CWT, the company’s team of air procurement specialists in North America, Europe and Asia collaborated with CWT Solutions Group to consider how its request for proposal (RFP) process might be approached differently to achieve good results. Our consultants are proactive during the strategic analysis phase. They identify any opportunities to maximize savings, whether coming from a client’s situation, or from macroeconomic indicator change. The traditional route of soliciting RFPs from carriers and analyzing their proposals against the baseline and competitive landscape, is not always the best way to proceed.

As a major travel buyer, the professional services company was in a powerful position, with carriers eager to keep its business. We considered whether a proactive strategy might work in its favor to maximize the savings achievable for a company with a mature travel program.

Solution

Our consultants explained how the client could increase its negotiation power with our index that combines a company’s data with market related metrics.

Cody Miller, air solutions manager at CWT Solutions Group, said: "We are willing to work through whatever issues there might be and tailor our analysis and deliverables to our clients’ needs. We have different configurations that we use to make it work for individual clients." This meant carrying out our air sourcing engagement a little differently for the professional services company. We sat down with the client to gather their savings objectives and understand the company’s business patterns for the year to come, which we combined with the analysis of their current spend and contracts’ performance.

Instead of following the standard approach of asking airlines to present their best offers – which we would have then analyzed to make recommendations for negotiations – we set the prices and targets we wanted for each route. It was up to individual airlines to decide if they wanted to retain our client’s business.

Working with the client, we identified the top routes and areas where improvements were needed. We defined savings targets for each of them and shared this with suppliers. The goal was to optimize discounts and coverage increase by putting all the carriers into the equation.

Results

Armed with the analysis and the prices we set, our client carried out negotiations with airlines. Our strategy was aggressive, asking for millions of dollars in savings across hundreds of terms and markets. We didn’t expect to achieve it all, but we hoped to exceed the baseline and we did:

Incremental annual savings versus the baseline over $80 million USD + totaled $4 million USD
Net effective discount savings increased overall from 17.8% to 18.7%

Cody concluded: "The client was delighted with the results. Next time it is due to start an RFP process, the same issue will be there – how to improve on best-in-class contracts. We will probably adopt a similar strategy again, or massage it in some new way that continues to be proactive rather than reactive."

Meanwhile we continue to provide the company with customized quarterly optimization reports. These show not only its current savings but changes that have been made since its contracts were put in place. Carriers are constantly massaging their contracts, particular with big clients, so our reporting highlights changes in service or discount to highlight the likely impact.

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