By “category management outsourcing” we mean engaging external category experts to assist you by adding to your internal procurement resources. And we do not mean using intermediaries from the supply chain to manage the supply chain. Historically, in business travel, this has been the case because of the way the supply chain developed. The corporate travel agencies, or “TMCs”, have been engaged to assist despite the fact that they are funded by sales commissions and cannot objectively oversee themselves.
5 good reasons to outsource
There are five good reasons to outsource travel category management, especially now. Three of the reasons are “perennials”. They’ve always been the case. And two of them are the result of the pandemic.
the three perennials
The travel supply chain has TMCs, airlines, hotels, hire cars, various IT and other sub-categories.
resource erratic
Click charts to enlarge
The procurement and management needs of each rise and fall at different times, by different cycles and with randomness thrown in. The total amount of category management resources that you need in any month is erratic and hard to plan for. Any permanent internal resource that you may have will tend to be under-utilised or insufficient at different times. It therefore makes sense to access the right amount of external expertise only when and as needed.
Business travel is one of those supply categories firmly in the outsourcing zone.
complicated but not critical
As 2020 has shown, your business won’t collapse without it. But it is one of the most complicated categories, with multiple levels, players, systems and processes arising out of a maze of relationships and financial flows. It’s not so business-critical that you have to commit expensive internal resources. But it’s sufficiently complex such that without deep category knowledge, you will get bad cost, risk and service outcomes for your business.
Travel is a classically conflicted supply chain.
conflicted and opaque
It is dominated by price and value-setting intermediaries funded by sales commissions from the end suppliers. And the financial flows, processes and relationships within the supply chain are not disclosed. However, the historic model has been to invest great trust and control with the intermediaries. Travel is an area of supply that really needs the independent expertise available through outsourcing.
plus the two caused by covid
trailing coal-face complexities
Travel in 2021 and beyond will involve new issues and processes regarding health & safety, regulations, restrictions and logistics. Many of these should and will be handled by the travel suppliers, and in the booking process by the TMC. But travel buyers need to assess, implement and monitor these new supplier deliverables. And there are new internal policy and process considerations that need category expertise and management above the supply chain.
a badly wounded supply chain
Travel has suffered more than any other industry. Many of the travel suppliers that you used to use won’t be there, or will be operating with reduced services. Travel agents and TMCs, who many buyers once relied upon for category management, are among the worst hit. This presents a “double whammy” of new and greater service needs hitting greatly reduced services. You need expertise to navigate the new environment, to access inventory, to minimise risk and to secure reasonable value.
