Case Study: Flying high with 20% savings on air spend
What was achieved:
Our client - a global pharmaceutical company - had a mature air programme through which it was spending more than $25m across more than a dozen countries. It wanted to find $400,000+ in incremental savings and achieved this, going from total air contract savings in Year 1 of $2,008,514 to $2,418,078 in Year 2 - an increase of 20.4%.
What we recommended:
We were able to identify missed savings opportunities while re-evaluating the client’s OBT preferencing to support and implement the changes necessary.
We already had expertise in navigating recent mergers to maximise savings, find further leverage and increase coverage. We do not see airline sourcing as standalone, instead viewing it as an ongoing process requiring continued management to ensure savings are made.
After detailed analysis of the existing air programme, the client's requirements and its travel patterns, we implemented a number of new solutions including:
- Sourcing - by gathering all interested airlines into one room, each was able to review a customised presentation of the client’s vendor relationship history including company profile, air trends and historical contract performance.
- A unique approach - this ensured all bidders heard the same information and client expectations while also illustrating the client’s past success in aggressively steering market share.
- Bid analysis - an extensive negotiations strategy was developed with the client, achieving an eventual agreement for multiple points of sale covering the majority of the client’s global air volume.
How the results were delivered:
A combination of comprehensive sourcing and on-going proactive contract management on a market by-market basis meant the client’s current savings were maximised while also enabling effective leverage for future negotiations.
FCM helped implement a steering strategy that focused on:
Providing clear monthly instructions to agents to drive preferred carrier usage on key routes to controls costs and optimise contract performance.
Evaluating the current rules and thresholds on the OBT, fine-tuning key city pairs on a monthly basis to drive business to preferred carriers in required markets.
Drafting, on behalf of the client, company-wide internal announcements to increase policy awareness and encourage traveller buy-in.
Offering the right words for inclusion in the client’s travel policy, making clear the reasons behind it and the projected results of driving preferred carrier usage.
Identifying frequent travellers throughout the company in order to strategically work out who could benefit from a gifted or upgraded airline status as a way of guiding programme costs and facilitating change management.
Overall, FCM was able to achieve a ROI of more than 900% for the client through various elements such as increasing its nett effective discount by 1.4% and a 3.1% increase in preferred carrier coverage to 75.2% of all flights. It also increased market share of the new preferred carrier by 4.2% and reduced market share of the previous supplier by more than 7.1%.