March 2008 - For more than 15 years, pharmaceutical giant Pfizer Inc. has continuously refined and expanded a global corporate card program that has served as the linchpin of its global travel management structure. In the latest evolution, Pfizer in January signed a new five-year agreement with longtime card vendor American Express for nearly 52,000 corporate travel and entertainment cards in 53 countries. Pfizer's 2007 card volume exceeded $800 million.
As the card contract neared expiration last year, Pfizer's procurement and travel departments invited seven card vendors to bid on their global card business. While incumbent American Express had served the company's expanding needs for more than a decade, procurement practices dictate that the business be rebid as contracts expire.
Led by procurement, a committee that included travel--as well as Management Alternatives consultant Carol Salcito--developed the request for proposals and analyzed the responses.
The goal was to "make certain we're competitive and to simplify and harmonize things on a global scale," said Philip Dunphy, Pfizer Inc. senior director of global travel services, who recently announced plans to leave the company after 14 years.
| • |
Company:
Pfizer Inc., the world's largest research-based pharmaceutical firm,
with 2007 revenues of $48.6 billion, 87,000 employees, offices in 150 countries and headquarters in New York |
| |
| • |
Volume:
$800 million in 2007 card spending on 51,885 cards in 53 markets
|
| |
| • |
Challenge:
Ensure that the company has a competitive global travel and
entertainment card program, and to simplify and harmonize global contracts |
| |
| • |
Approach:
Invite seven global commercial card vendors to bid on the business, present their solutions and engage in a competitive bid environment that lasted for more than six months |
| |
| • |
Solution:
Recontracted with American Express, incumbent for the past 15 years, for a global T&E card to be expanded into new markets
|
|
|
One of the early adopters of global travel management, Pfizer manages several aspects of travel on a global basis: travel management services, airlines, car rental, expense reporting and policy. According to Dunphy, "We've been benefiting from globalization all along."
Nevertheless, Pfizer also recognized that market conditions and vendor options change. As more companies have deployed cards globally, card companies have introduced a bevy of partnerships and service enhancements to meet the growing needs. As such, Pfizer's card team decided that a competitive bid process would be the best way to ensure the company had the best match of services, coverage and prices.
All seven vendors bid on the business, due to the "huge opportunity there" and the fact that the company promised that "everyone would get a very fair shot at it," Dunphy said. "I think we also gave some very strong feedback. We engaged them in several meetings and had very open, candid discussions. We were looking for certain capabilities."
Dunphy declined to name the bidders, but, beyond American Express, competitors in the global corporate card marketplace include: Bank of America, Citibank, GE Money, JPMorgan Chase and US Bank.
'P' for Proposal, Not Price
According to Dunphy, "When you go through an RFP, remember that the "P" is for proposal--not price. When you're really looking to do business with what I would call a strategic partner--and we do highly view our corporate card provider as a strategic partner--they're not just a vendor. There's a difference between a strategic partner and vendor you buy from."
Travel management, corporate card and technology companies are all strategic partners, Dunphy said. "The fabric of their operation is woven into your organization. So you're looking for a request for proposal on what you think is going to be the best partner going forward from all the aspects of services and pricing that they can provide to meet the needs of your corporate culture."
From each vendor, Dunphy heard "a lot about global data consolidation. That was very interesting, and we wanted to get a full understanding and appreciation about what companies are doing there. That's an area that they're all working on, and we believe it's an area that needs to be worked on. It's something that major global companies really need card companies to deliver."
| |
1995 |
$127 million / 12,300 cards |
|
|
| |
2007 |
$800 million / 51,885 cards |
|
|
Source: Pfizer card data
|
|
As with most global travel data, card data is structured according to the laws, technology and/or vendors of each country. Consequently, consolidating data across multiple countries and on a global basis proves challenging. Instead of one feed into global expense reporting systems, multinational programs usually have multiple feeds. Vendors have long promised better solutions, as Pfizer heard during the bidding process.
Harmonization was a goal of this bid process and was achieved, Dunphy said. "We're very happy that we're able to harmonize a lot of the aspects of the contract and simplify the terms and conditions across many, many markets," he said.
Prior contracts were "almost like having 53 different deals in one contract," Dunphy explained of the country-by-country terms. "We were able to streamline that and harmonize it and simplify it, which really helps all the international markets have a better understanding of what we're doing in this arena." Today, "there's one master contract and then addendums, not for each country, but for many."
After weighing its options, the committee narrowed the field, sent a recommendation to senior management and then presented it to the company's new CFO Frank D'Amelio. Finally, they reviewed the new contract with the chairman, who signed the deal on Jan. 29.
Vendors have significantly advanced global capabilities to serve multinationals--and still have much work to do, he noted. According to Dunphy, five of the seven bidders are nearly "capable of covering the globe. Are they there yet? No."
While this review process took "longer than it normally would, for various reasons," Dunphy said this type of process should not exceed six months, but this one clearly did. "Typically, we're very efficient. We try to be efficient because we think it's fair to the vendors. In this particular case, it didn't roll out that way." The review includes time spent in legal, "particularly for this one because there's a lot of money being passed through" with the huge charge volume, he explained.
Learning of Innovations
"Through the process, we realized that we're in a very, very good position," Dunphy said. Nevertheless, Dunphy said the process allowed Pfizer to notice "some new, interesting things out there with some competitors to Amex. But when you looked at the overall relationship, services, abilities and where Pfizer is right now, did it make sense to change? The answer was no," Dunphy said. "Based on Pfizer's current business needs, American Express is still able to fit that bill for us."
Even with a 15-year-old program, and travel cards in the hands of 60 percent of its employee base, Pfizer continues to target markets for further expansion. While it doesn't have an "official" card program in Russia, "we still have a huge focus on the Eastern European and Russian areas--the whole Eastern Bloc--trying to understand the acceptance of American Express there."
Dunphy said Pfizer also is trying to expand into some African markets and since May has been working in China where there is "the potential for several thousand cards."
|
"Global data consolidation is an area that they're all working on, and we believe it's an area that needs to be worked on. It's something that major global companies really need card companies to deliver."
— Philip Dunphy, senior director of global travel services, Pfizer Inc.
|
|
|
Dunphy joined Pfizer in 1994 as it began globalizing travel management and debuted the global card program. By the end of 1995, the company had 12,300 cards and $127 million in volume, Dunphy said. A year later, 9,500 employees in the United States and 4,500 overseas charged more than $140 million worth of T&E to their Amex cards, according to a best practice profile of the program published in 1996. More than a decade later--and following the acquisitions of Warner Lambert and Pharmacia--the number of cardholders expanded threefold, while the volume grew more than 500 percent.
Data on all that spending is captured by American Express locations around the globe--"that's where all those data feeds are so important," Dunphy said. The data feeds Pfizer's global expense reporting tool, Concur, and finds it way through to the company's general ledger. Procurement, travel and authorized users within Pfizer also use American Express @ Work to analyze the monthly, quarterly and annual spending data, search for trends and identify ways to better leverage their spending.
Teamwork
"We work hand in hand with our procurement people," Dunphy said. "I'm sure they find us challenging at times, and we find them challenging, but there's nothing wrong with any group being challenged. I think there's a newfound respect for going through a process and what it can do for a company, and a newfound respect from the procurement side about what their internal subject matter experts can really bring to the table," he said of the travel team.
"The fact that we're looking at data from two different perspectives really helps us make better decisions," Dunphy said of the pairing of travel and procurement. "This is why it's important in the Pfizer world and where we see the value of travel and procurement working together."
|
"Travel management, corporate card and technology companies are all strategic partners. The fabric of their operation is woven into your organization. So you're looking for a request for proposal on what you think is going to be the best partner going forward from all the aspects of services and pricing that they can provide to meet the needs of your corporate culture."
— Philip Dunphy, senior director of global travel services, Pfizer Inc.
|
|
|
On an annual basis, travel and procurement "review all spending and brainstorm strategies," Dunphy said. With its mature global travel program, Dunphy and others know the cycle on which they will rebid major components. For example, the card last year, global airline RFP this year and global travel management company RFP in 2009.
Pfizer's travel and procurement teams also have identified additional resources they might need for certain bid processes. For the airline RFP, consultancy Advito is "doing data support and high level recommendations," while Management Alternatives is helping with the process and support.
The team also mines the data for new areas to explore and better leverage. Sometimes procurement will take the lead on new endeavors, other times travel will lead, Dunphy added. At times, both departments will decide that they really don't have the resources to address an issue, but they present their findings to management. For example, using card data on restaurant spending, the travel department benchmarked spending against other companies. They provided senior management with the data points for competitors and Pfizer departments, and suggested that the category be studied more closely.
"We've only shared the data with the business, but we are seeing the business take action on some of the data points and the benchmarking that we've been able to provide," Dunphy said. As a result, Pfizer's restaurant spending has declined.
Rush To Transform Meetings
"The new thing we're working on, which I think everyone is working on, is trying to investigate all the different ways to better manage meetings, the technology and payment process," Dunphy said. "Although we haven't made firm decisions there yet, there are a lot of discussions going on.
"Pfizer and the whole meetings side of the industry are going to make strides at twice the speed, or faster, than we were able to make in travel management because of the synergies and new understanding of technologies," Dunphy continued. From how to more effectively register, source, manage, execute, reconcile and pay for meetings, Dunphy expects companies to forge more efficient ways to do it all in a seamless process.
