Monday, January 31, 2005

Strategic sourcing and travel distribution

In travel procurement terms, "Strategic Sourcing" has traditionally been defined as the standard bidding process for airline, car, hotel and travel agency services. With the dramatic changes emerging in travel distribution technology, strategic sourcing can take on new meaning. These changes reflect the urgent need of traditional airlines (AA,UA, DL) to lower distribution costs and the emergence of lower cost distribution technology. It is yet unclear if the old Alfred Kahn quote "Airline yield management means: you yield to my management" will still prevail in respect to airline influence over corporate purchasing behavior. The opportunity does exist to use this emerging technology to control sourcing by dictating how inventory is distributed. Will this new leverage be recognized? I believe this will only happen if C-Level executives take ownership over their travel procurement costs and act in innovative ways. This may prove to be problematic as travel expenses are generally not viewed as a strategic decision point by C-Level executives. Of course sourcing strategies will need to take into account the need for major airline to reduce their costs as many are in a survival mode. Which entity uses the new distribution technology as leverage will be interesting to watch...

15 comments:

AceMakr said...

I think they'll eventually get it - I think UA took a clumbsy poke in that direction last week. Unfortunately, ITA and G2 aren't far enough along to get others onto the bandwagon. It's risky and no one wants to be first to realize it may be a mistake.

George Kuboaa said...

I love your blog but despise esoteric acronyms and arcane lexicons. What does "C-Level executive" mean? Some people use "C-Level" to connote the highest level executive, which is unfortunate because making "A" the highest level means there can always be many levels of subordinates (B to Z).

In this case, I presume you are using "C-level executive" in reference to managers who report to "A" and/or "B" level executives and are responsible for a particular department, division, or function. I'm guessing you are also referring to managers who dictate the budgets in their respective divisions and provide strategic recommendations to the "A" and "B" managers with regard to the direction of their function.

Nevertheless, please think twice before bandying about with corporate-speak words, phrases, or acronyms. I respectfully suggest that everyone isn't necessarily on the same page with respect to your definitions. Thanks.

George

TravelGuru said...

C-Level is commonly used everywhere-it is called C-level since it bunches: CEO/CFO/CTO/CMO/CIO/COO, all the top level execs.

re: GNEs: we will need to keep our minds open. I've seena demo of what G2 is coming up with, and it has a module in which the agent types in the GDS command that gets translated into their booking system. Very slick.

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