Procurement guidelines

Five guidelines that companies should keep in mind as they create their spend management program - StarCite

1. Data Consolidation
2. Preferred Vendor Program
3. Legal Oversight
4. Company-wide Visibility and Coordination
5. Approvals Process

1)Data consolidation

One of the most fundamental rules of procurement is consolidation of spend for more efficient buying — or, in simple language, volume discounts. So why haven’t most companies consolidated their meeting spend already? One reason is the distributed nature of meeting sourcing touched upon earlier. Marketing and sales departments may account for most of the meetings in the organization, but when added up, training, HR, finance, and R&D can also account for a significant chunk of spending. For large organizations, when multiplied across divisions, there may be upwards of 10 different groups contracting with the same supplier and no one has any idea of how much was spent by the company in total.

One practical solution would be to centralize all meeting-related sourcing within the company. Even though individual departments can plan and organize their meetings, vendor selection and contracting is handled by a central group of experts. Many companies follow this process quite successfully. However, for most large, de-centralized organizations, this is hard to implement and even when sourcing is centralized, usually just the larger events are sent to the central sourcing group, smaller ones continue to be handled within the departments often for quite practical reasons like short lead times.

Today there are technology tools that can help overcome this problem. By allowing departments to source their own meetings, companies can accommodate autonomy without compromising on data consolidation as the technology collects the sourcing related information on the back end and feeds it to the meetings/travel group for consolidation and analysis. These tools however need to be intuitive and easy to use as departments may not have dedicated meeting planners who are willing to learn complex systems.

2)Preferred vendor program

Once the data has been collected and analyzed, it usually paves the way for a preferred vendor program. It is always more beneficial to be dealing with 5 vendors for a particular service than 15. And that’s not always because you stand to get a better rate, although resulting savings of around 20% are not uncommon. When you account for a sizeable share of a vendor’s business, you become more important to them and they are more likely to offer better service. By doing business with you repeatedly they get to learn your objectives and preferences resulting in greater efficiencies on both sides.

The caveat is that you must have the ability to channel business to your preferred vendors. If you go ahead and sign an agreement but fail to follow through not only will it jeopardize your current agreement, but you will have lost credibility for the future. It is better to wait until you feel you have enough visibility into meetings activity, have some processes in place, and secure buy-in from internal stakeholders. When you are confident you can commit to a certain volume, then go ahead and contact vendors.

Preferred vendor programs apply to all types of businesses including hotels, ground transportation, meeting management companies, A/V suppliers and more.

3)Legal oversight

Experienced planners know that penalties in the six-figure range can be levied and extracted from companies in the event of a cancellation of a large event. While in the regular course of business the amounts are much lower, many companies routinely pay out hundreds of thousands of dollars each year in attrition, cancellation and other penalties when they could have been a fraction of that amount. How can a company prevent large penalties across the board?

Legal oversight of meeting contracts is the most basic procurement process reform that every company should incorporate. It can be accomplished in many ways. Many procurement departments have legal experts whose job it is to protect the company’s interests in vendor agreements. If that is not available to you, work with your legal department to arrange for the appropriate resource. Ideally, the company needs to be covered on all contracts large and small. They best way to accomplish this is to have your largest contracts reviewed individually by a legal expert while creating a set of standard terms and conditions that cover all other meetings.
Standard terms and conditions are generally created by the company’s legal department. They are appended to and supersede the supplier’s contract. Companies using electronic RFPs can typically set up their system in such a way that their standard terms and conditions are attached to all outgoing RFPs leaving nothing to chance.

4)Company-wide visibility and coordination

It is a simple concept, but total meeting visibility is often ignored and can be hard to execute. As noted before, meetings are planned and sourced across the organization by groups of people who don’t know each other and don’t work together. This can lead to a lot of missed opportunities like the ability to hold two meetings at the same property back-toback thereby leveraging economies of scale. Or, the ability to share cancelled space information so that another group within the company can pick up the space, saving the company
some or all penalties.
Clearly when sourcing is centralized, this is more easily accomplished. A meeting registration system or enterprise technology are other ways that companies can gain visibility into meetings activity and leverage that information for savings.

5)Approvals process

Companies differ widely in the number of approvals they require, how closely they adhere to their process and consequences of non-compliance. Some companies have elaborate structures and are rigidly mandated while others are more relaxed and still others would like a better system but don’t know how to go about implementing it. Key stakeholders in the meetings spend management process will need to decide how much should be regulated and how strict the controls should be. Usually, the company culture is an important influence in this process. For meetings, there can be many different types of approvals: permission to have an off-site meeting that involves travel and overnight stay; holding the meeting at a 4 or 5-star property rather than a 2 or 3-star property; allowing guests who are not employees to join the meeting, etc. There can be additional guidelines based on safety considerations including meeting locations especially when overseas destinations are involved. At the very least, companies need to have a system in place to ensure there is an approval process before the meeting takes place.

Some of the considerations include:
• A physical meeting involving travel and overnight stay is necessary as opposed to web conferencing
• A budget has been created and sanctioned by a person(s) manager at the appropriate level
• Approval or involvement of the travel department