Driving Down Ground Transportation Costs

Strategic road-map for managing executive cars and taxis

BCD Travel In Motion, August 2009

Every business is working hard to find savings in its travel program, yet one area of expenditure is still frequently overlooked. Larger companies can easily spend a couple of million euros or dollars a year on executive cars and taxis, but, “it often goes unmanaged,” says Torsten Kriedt, vice-president, Innovation & Intelligence for Advito, the consulting wing of BCD Travel. “Companies don't know how much they are spending or who they are spending it with.”

There are several reasons for this oversight, according to Jonathan Willoughby, managing director of W5ive, an independent ground transportation specialist which works with Advito in this field. “It is highly emotive,” he says. “Many businesses would like to tackle it, but there is a fear of upsetting travelers over their long-standing supplier relationships. Many also lack time to manage a spend category that, although smaller than related categories such as air or hotels, often turns out much more expensive than they think.”

Another problem, says Willoughby, is lack of co-ordination. It makes sense for the management of ground transportation to be linked to management of the rest of the travel program, because it helps gain full visibility of the total cost of a trip. Instead, however, the task is often assigned to the facilities department or a non-travel specialist in procurement.

In addition to controlling spend, there is another good reason for managing ground transportation more closely. Duty of care is becoming an increasingly important aspect of corporate travel strategy, and developing a proper preferred supplier program helps ensure travelers will be safe when they step inside a vehicle. Methods of assuring security are becoming more sophisticated, says Kriedt, even down to the automated communication of drivers' registration numbers to travelers via SMS messages.

Below is a five-stage road map to get ground transportation programs up and running:

1. Data
Ground transportation management is often complicated by an absence of historic spending data to start supplier negotiations. However, it is possible to dig up some figures by requesting data from existing vendors and hunting through internal departments such as accounts payable. “The more you explore, the more you find your spend is diluted across multiple suppliers and, importantly, the pricing model is probably not transparent,” says Willoughby.

Once the entire management process is up and running, managers end up with much better information, especially if they deploy a booking tool. This could include strategically useful data such as CO2 emissions and where travelers have refused opportunities to share vehicles with fellow employees or declined a preferred service provider.

2. Policy
Companies usually cover ground transportation in their travel policies but fail to provide adequate detail, according to Kriedt. For example, instead of stating a general principle that trains are preferable to taxis, it might be better for policies to prescribe the correct option on all major routes, such as from head office to the nearest airport. These route plans should also indicate how much time the journey takes and the likely cost.

Each route plan needs to be created after careful consultation with local staff who will know what is appropriate and what is not. For example, public transport may be acceptable during the day but considered unsafe at night, when an executive car should be booked instead. “Employees should be in no doubt when they arrive at an airport how they should be traveling on from there,” says Kriedt.

3. Online booking
There are now a small number of independent booking tools available to make reservations for executive cars. As with tools for other types of travel, they can be customized with policy rules, and they also generate excellent management information. Reports from companies which have introduced online ground transportation booking say the tools are relatively easy to introduce, integrate well with other booking tools and help push down costs through policy control and improved visibility of spend.

4. Supplier management
Once a buyer has some data in place, it should be possible to consolidate to a smaller number of preferred suppliers. The executive car market remains relatively under-consolidated, but it is starting to coalesce more, and the concept of the negotiated deal is well-understood.

Buyers need to distinguish between public taxis and private executive cars, also known as sedans or chauffeur-drive limousines. Taxis are often cheaper and quicker to locate for short journeys, such as within a city center. However, taxis lack duty of care checks, and booking them remains largely a manual process. As a result, they can create big holes in a company's data. It may be possible to rectify this by instructing travelers to pay for taxis with a corporate card, but not all taxis accept plastic payment and those which do are liable to impose significant surcharges.

5. Communications
“Success in ground transportation management is about changing mindsets,” says Willoughby. “If it is not embraced by the business, it won't work. You need to communicate from start to finish. If you can explain why you are introducing the strategy, as well as what it is, travelers will go with you.”