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Philips' brings travel expenses down to earth
Case study: savings on air travel through benchmarking

By Julian Goldsmith

Published: Wednesday 03 October 2007

Dutch electronics giant Royal Philips Electronics has streamlined its travel and entertainment programme through strategic alliances with SkyTeam and American Express.

In 2005, the manufacturer chose to rationalise its supplier base, buying services on a global basis. As part of that strategy, it signed a deal to take travel services through SkyTeam, a global airline alliance of nine members - Aeromexico, Air France, Alitalia, Continental Airlines, CSA Czech Airlines, Delta Air Lines, KLM Royal Dutch Airlines, Korean Air and Northwest Airlines - covering travel in over 30 countries. To keep track of expenses, it opted for the travel and entertainment programme offered by American Express.

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The Amex service benchmarks each of Philips' negotiations with SkyTeam against a list of other transactions by companies of a similar size and business, made up from its own customer list. This allows the manufacturer to measure whether it is getting the best deal from its partnership with SkyTeam and gives it ammunition to negotiate prices down.

Philips senior sourcing specialist for airlines Peter Sijbers said: "American Express has an extensive customer database. It's a very attractive asset when you are negotiating with suppliers. After the negotiations are concluded, we are able to make our results auditable and measurable."

Philips has experienced an immediate impact, with an incremental reduction in air travel costs of four per cent per year, on a turnover of €67m (£46.4m) per year.

Since this project was started, Philips has piloted expense management in collaboration with American Express Consulting for other global suppliers. Hertz car rental is one of those suppliers it has recently migrated to the Amex system. However, some expenses processes within the company are not yet dealt with globally and Sijbers admits that they will have to be consolidated before he can universally apply the Amex benchmarking system.