THE PUSH BY PROCUREMENT to oversee the sourcing of travel and meetings is still in its infancy at most U.S. companies. But at Organon, a pharmaceutical company based in Oss, The Netherlands, the two have been working together successfully for more than four years — and it was meetings that drew procurement into the process.
That's when Birgit Roeterdink, who was then the head of travel and meetings, approached the global head of procurement at Organon about setting up a procurement arm for her department. Management liked the idea so much that they created a new position for her: global procurement director for travel and meetings. In that role, she has initiated some innovative programs, including an eight-member travel and meetings council of meetings, procurement, and travel professionals from various countries who work together to make buying decisions and set policy.
The council develops meeting- and travel-related policies, develops preferred-supplier lists for the company's major markets, and confers onand RFPs. It also develops best practices and exchanges ideas from the members' respective countries, watches industry trends, and performs other strategic tasks.
Minutes of council meetings are forwarded to company management, and summaries are posted on Roeterdink's intranet site. The site also has sample RFPs, contracts and service-level agreements for suppliers, and other tools for people planning meetings and travel.
The council has been a huge success, she says, and it created “a buy-in for joint strategies and procedures across the company.”
Why are European companies such as Organon — with 15,000 employees and annual sales of 1.975 billion euros, it's smaller than many Fortune 500 companies in the United States — so far ahead of the curve when it comes to merging meetings and procurement? In part it's because in Europe, procurement has been involved with meetings and events for several years, with its influence ratcheting up over the past three or four. According to a study by George P. Johnson Co., Richmond, Surrey, U.K., about 65 percent of procurement managers in the U.K. say procurement's involvement in event services purchasing has increased over the past five years. Forty-six percent predict that events will become a high priority in the next few years.
While most U.S. companies are just starting to connect the two entities, in many European companies, such as Organon, it's more a matter of refining the processes. So there is a lot to learn by looking across the pond.
The European meeting industry has been built on a foundation ofmeeting planning functions to various suppliers. Because most European companies are smaller than U.S. companies and operate nationally, they do not have the size and resources for internal staffs. It's common for meeting suppliers to deal directly with procurement.
“Within [MPI Europe], our membership of meeting/event planning agencies is a lot higher than it is in the States,” confirms Didier Scaillet, director of European operations and global development at Meeting Professionals International. (MPI hosted a procurement forum with the European Institute of Purchasing Management at its Professional Education Conference-Europe in April.)
In many cases, even when there is an internal meeting planner, European companies send RFPs directly from the procurement department instead of through the planner, says Padraic Gilligan, partner and director of marketing with the Ovation Group, a Dublin, Ireland, event management company (or event agency, as they are called in Europe). From the supplier side, he says, “it's imperative to understand the corporate culture.”
Other reasons for the differences between U.S. and European companies are mainly cultural. “In the U.S., it's a lot more personal,” says Colja Dams, chief executive officer, Vok Dams Group, a Wuppertal, Germany-basedcompany. “Decisions in the U.S. market are based more on a good relationship between the agency and the person in charge of the event.”
There is also a cultural difference when it comes to pricing and negotiations. Pricing is more of an exact science in Europe than it is in the United States, says Bernard Gracia, director of the European Institute of Purchasing Management. “In America, negotiating is about trying to find an agreement that is win-win and not putting too much pressure on the supplier,” he says. “What we try to do here is avoid the costs rather than negotiate the price, and that is accomplished through a very detailed RFP with clear definitions of requirements. If it's not necessary, we don't need it, and if we don't need it, we're not paying for it.”
Preferred Suppliers Common
Preferred suppliers, which are still fairly uncommon here and are used mostly by larger companies with centralized meeting departments, are commonplace in Europe. According to a recent survey by MPI (see box on page 15), 82 percent of European procurement officers and 86 percent of meeting planners use preferred suppliers. All the suppliers responding to the survey say they are on at least one preferred supplier list and all the respondents — suppliers and corporate planners — say the use of preferred supplier lists makes their jobs easier.
To get on these lists, suppliers go through a rigorous review process, and only then are they allowed to bid for the business. The process usually takes about a year, according to Dams, whose company is a preferred supplier for about half of his clients, including Volkswagen, BMW, and L'Oréal. If an agency is not a preferred partner, it's difficult to get a foot in the door, he says.
For corporations, the use of preferred suppliers not only saves money through volume discounts but also saves the hassle of teaching new suppliers the nuances of the organization and its events. This comfort level with her suppliers is important to Roeterdink. “The main effect is that our suppliers are knowledgeable about our company — who we are, what we do, and what services we need,” she says.
Organon also uses preferred hotels for its meetings, although not exclusively because with such a wide variety of meetings, many with short lead times, planners need the flexibility to go “off list.”
SAP in Geneva, Switzerland, uses preferred suppliers for some meeting services (such as audiovisual), but not all, according to Luca Favetta,director. However, he says the company is moving toward using only preferred suppliers. The lists are usually short — two to four companies. For smaller meetings, he often just selects one of the preferred suppliers to do the job; for larger events, he will ask everyone on the list to bid on the project.
Increasingly at many European companies, the selection and hiring of preferred suppliers is becoming a joint decision between planners and procurement. Fifty-eight percent of the companies in the MPI survey say the selection process is a team effort, with 85 percent saying that the team consists of both procurement and meeting professionals.
Preferred suppliers are considered to be an arm of the company in many cases. At AstraZeneca, a London-based pharmaceutical company, procurement officials meet with preferred suppliers once or twice a year for what they call a “performance business review.” The meetings allow the suppliers to understand the goals of the company and the company to hear about suppliers' expectations. They also hold “Awareness Days,” which, says Jayne Stephens, global buyer, conference agencies, “let our buyers understand the services provided and by whom.” In addition, they schedule video- and teleconferences throughout the year when specific information needs to be shared, and have a Web site exclusively for preferred suppliers.
Fees for RFPs
The RFP process is another area in which U.S. companies can learn from what is happening in Europe.
“We try to be as detailed in our RFPs as we can,” says SAP's Favetta. “The more precise we are in the briefing, the better proposal we get, and the less time we spend later adjusting and providing additional information.” As a result, his RFPs are often lengthy and specific — sometimes running dozens of pages. Ovation Group's Gilligan has seen RFPs that were hundreds of pages long.
A procurement initiative known as “category management” is increasingly being applied to RFPs in Europe. It requires suppliers to break out costs by function, such as site coordination, project management, AV, and marketing. They can bid on the total package, but costs have to be broken out. Corporations are also requiring more detailed information on potential meeting sites than ever, says Sebastien Tondeur, director, MCI Group, a Geneva-based event management company. “In the past, we would just say, ‘We will use 1,000 rooms in Barcelona,’ for example.” Now, he says, clients might ask for specific details on several hotels in several different destinations.
Because RFPs are so long and take so much time and effort — not to mention money — to complete, suppliers such as Vok Dams Group have begun to charge companies for them. Dams has received 200-page RFPs with detailed explanations that call for equally specific responses. Because his bids often involve computerized renderings, video, and significant travel costs, he always charges a fee whenever he bids on the overall communications strategy of an event, which is then credited toward his project fee when he gets the business.
“That doesn't really happen in the U.S.,” he says. “But in Europe everybody wants everything so detailed so that you can start the next day with the event.” Another difference is that companies usually only invite a handful of bidders for such projects, while here dozens could be competing at once.
Planners' Roles Evolve
Almost as the next logical step, purchasing departments in European companies have begun to add staff with meeting backgrounds to gain better insight into buying in these sectors.
“Some procurement people are former managing directors of event agencies, so I sometimes find myself dealing with somebody who has been a competitor for years, and now he is sitting there in the procurement department,” says Dams. “These people know what's happening in the industry.”
In a way, what the meeting industry is going through now is similar to what the advertising industry went through in the late 1980s, says MCI's Tondeur. Just like advertising, he says, “we are in the intellectual service business. We sell people. We sell time. We don't sell product.” Purchasers cannot buy without defining what they want in exchange, and that is why a partnership with meeting planners and suppliers is so important.
“I think procurement is helping our business become a business,” he adds. “They're helping us structure, but they also have to understand that they can learn from us.”
Procurement + Meetings at SAP
At SAP, Geneva, Switzerland, the procurement and meetings relationship is a bit tricky, explains Luca Favetta, global events director. He deals with two departments: global procurement for international events and regional procurement for Europe-based events. Procurement tends to be more involved in larger events. Typically, his staff of 10 selects suppliers and drafts the RFPs, while procurement takes care of contracts and negotiations.
For the most part, the partnership works well, says Favetta, who has been with SAP for the past two years after spending 16 years with Hewlett-Packard — but it has not been easy.
“Corporate planners and procurement run at two completely different speeds,” he explains. Planners react on a dime and are used to an environment that is constantly changing, whereas procurement is more process-driven, and often cannot understand the rationale for a last-minute request. “It takes time,” he says. “We don't speak the same language.”
Charles Robinson, executive director of the U.K.-based Incentive Travel & Meetings Association, can certainly speak on best practices when it comes to procurement — but he can also speak on the worst ones. ITMA is collaborating with U.K.-based Chartered Institute of Purchasing and Supply to develop best practices to help avoid common meeting procurement hazards.
One such hazard is making procurement officials the one and only contact for third-party agencies. Locking the internal planners who are running the event out of the discussions, he says, is “a recipe for disaster.”
Another mistake: Procurement officials parachuting in at the last minute to exert their authority over some detail — usually having to do with cost.
Robinson is also puzzled by companies that have preferred supplier lists but consistently award projects to the same one or two suppliers. It's hardly worth a supplier's effort to get on a list if he is constantly bidding on projects to no avail.
Finally, an unethical practice that concerns Robinson: when procurement takes a pitch from a meeting planning company, turns it down, and then takes that company's ideas and ask another supplier to do it for a lower price.
Procurement + Meetings at Norwich-Union
At Norwich-Union Insurance, Norwich, U.K., the relationship between procurement and meetings is “kind of a push-pull,” says Andrew Latta, head of event management. Procurement is pushing to work with the internal meeting department to save money. And, where he is being asked to justify his role and prove return on investment, “procurement is one of the tools to actually help you do that.” (Latta is in the middle of developing anprogram that looks at attendee learning, application, and business impact.)
For example, on the recommendation of its procurement department, Latta now uses a site-selection company for U.K.-based meetings. He selects the firm, but theis negotiated by procurement. “Our first point of contact is not necessarily the venue, it will be a venue-finding agency.” This frees up staff to concentrate on other things. “We don't sit here and call 20 different venues from our desks any more.”
How's It Working?
A recent survey of 40 European meeting planners, procurement officials, and meeting/event agencies conducted for Meeting Professionals International paints a picture of what is happening at European companies when it comes to supplier selection. Among the highlights:
- 82 percent of procurement professionals and 86 percent of planners use a preferred supplier list.
- 100 percent of the agencies surveyed are on at least one preferred supplier list.
- 89 percent of procurement professionals, 67 percent of planners, and 93 percent of agencies know of instances where event services were provided by an organization that was not on the preferred supplier list.
- 100 percent of procurement professionals, 83 percent of planners, and 73 percent of agencies say preferred supplier lists make their jobs easier.
- 58 percent of respondents say it's a team decision as to which meeting/event agency is hired; 85 percent of those who say it is a team decision have both internal planners and procurement professionals on the team.