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BUSINESS PROCESS REDESIGN IN TRAVEL MANAGEMENT

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BUSINESS PROCESS REDESIGN IN TRAVEL MANAGEMENT

ABSTRACT

Travel and related expenses account on average for 7% of an organization’s total operating costs and are escalating to be the second largest controllable corporate expense. Based on rising business travel demand in past decades, the management of business travels has received increasing attention. Furthermore, the rapidly changing environment in the travel industry dominated by requirements for e-business offers organizations evident possibilities to manage business travels more efficiently. As a consequence for organizations, all transactions around business travels, from travel planning to reimbursement of expenses, have gained great importance. Organizations aim to reduce and control their travel costs by the utilization of integrated computer systems, such as the enterprise system R/3 and implementation of Travel Management. But how does an organization find its way to reduce costs and at the same time process high amounts of business travels based on a high quality for the traveler? Is this task an insoluble conflict or can it be a win-win situation for all involved parties? The following teaching case provides the initial stages of a process reengineering project undertaken in a shared service provider for local government departments in Australia. The objective of this project is to reengineer the process of business travels applying a reengineering methodology.

BACKGROUND

The Australian Corporate Services Agency (CSA) is a shared service provider established in July 1996 and jointly owned by two Queensland government departments. CSA provides its services to these two departments, which are responsible for industries and resources. CSA was founded by outsourcing and merging service departments of these two organizations to a separate organizational entity. The underlying beliefs are that shared services can greatly improve the value and enhance the productivity of support functions. Therefore CSA’s business objectives of shared services are strongly influenced by the demand for CSA’s services as presented in Figure 1.

The infrastructure of CSA has been designed to effectively deliver 25 major products covering financial, human resource management and administrative functions through a head office and seven service centers. The total workforce of 260 employees ensures a statewide presence of CSA. While the majority of products and services are managed from the head office, CSA’s service centers are able to assist customers more locally with the delivery of services. Basically CSA comprises three service areas in business advisory, support services and corporate information systems led by a general manager. CSA delivers its range of corporate services under a service level agreement to ID and RD. CSA’s mission statement is to “professionally deliver quality corporate services for government.” CSA is responsible for operational and processing functionsfor corporate services, with the strategy and policy functions remaining with the customer departments. In the financial year 2001/02 (the Australian financial year starts on 
July 1), CSA had a financial budget of AU$22M available to deliver all services. One major service CSA is providing is the organization of business travels for 8.157 employees working for ID and RD. Both departments are due to their business objectives spread over the state of Queensland at more than 150 locations (Corporate Services Agency, 2002).

SETTING THE STAGE

Corresponding to their strategy, CSA has implemented an enterprise system, which as a real-time and centralized system supports complete data visibility on all organizational levels. SAP R/3 (Version 3.1H) was chosen to fulfill CSA’s business requirements; also both of CSA’s clients use the SAP R/3 system. SAP R/3 Financials has been used since November 1998, and the SAP R/3 Human Resources since late April 1999. The implementation costs were, as in many other implementation projects, determined by high consulting costs. Before the enterprise system was implemented CSA had to manage several legacy systems, which were partly substituted by the enterprise system. A still remaining legacy system is the in-house developed Asset Management Information System (AMIS). AMIS contains a catalogue of owned and leased assets separated by asset fleet, type, make and model, location and business area. Apart from asset register functions, AMIS performs the following additional tasks:

-Fuel Card Management: Cost recovery of fleet vehicles’ fuel expenses and control of fuel invoices.
-Vehicle Hiring: Provision and invoice validation of fleet vehicles for business travels. CSA administers 2,000 fleet vehicles.

The IT staff of CSA is very confident with this system and there is an organization-wide high resistance to replace this system. AMIS is not fully integrated with SAP, but communicates in some areas via interfaces with SAP R/3. Currently the preparation for a system upgrade to SAP R/3 4.6C, scheduled for April 2002, is taking place. To realize the benefits of the costly implementation and upgrade, CSA is faced to achieve full capabilities and business values by adopting best practices, reducing operational costs and integrating the Financials and Human Resources modules. The IT management believes that a major impact on the way of service delivery will be from the increased integration of information systems and through the improved use of information technology. To realize the benefits of information systems, data shall be captured on one single and early point and converted into meaningful information, legacy systems and business processes need to be integrated, and data and information need to be easy accessible. Some of the key areas on which CSA is focusing involve employee self-service, electronic forms, e-procurement, and travel and expense management.

CASE DESCRIPTION: TRAVEL MANAGEMENT

Project Background

Liz, administrative travel services officer at CSA, is sitting at her desk and preparing a report for John Walker, Resource Department. John would like to know how many times some of his team members were traveling to Rockhampton and Bundaberg to set up a brand-new dingo fence. He needs to know in detail which accommodation they selected and who else of the entire organization is going frequently to these places and for how long. A local hotel manager, who offered John a business contract with fixed rates for accommodation, contacted John before. “This can significantly reduce our accommodation costs,” he is thinking, and he wants to investigate this lucrative offer. John e-mailed his request to Liz, who easily creates for him a report in the enterprise system containing all required details. Ten minutes later John receives the report and he can start to evaluate the data.”‘How the time changes,” he thinks.

Unfortunately the easy creation of a report in the enterprise system for John Walker is not a reality yet. Mary-Lyn Harrison, senior project officer at CSA, stated, “We simply don’t know who is traveling when, where and why, causing how much costs although we capture all data on our travel documents.” For these reasons CSA’s management decided to initiate a process reengineering project as part of their efforts to realize maximum benefits of their enterprise system. The scheduled system upgrade offered the chance to implement and to redesign the business travel process based on a total Travel Management solution. The business process redesign should achieve a higher process efficiency and enable CSA to serve their customers with Travel Management as a high quality and reliable product. The project should apply the reengineering methodology of the process management life cycle

After identifying all core processes, the processes will be captured in an as-is process model in order to simplify the following process analysis. Based on identified IT and organizational issues, the project team will develop alternative to-be scenarios and present them to CSA’s IT management as project sponsor. The project team will herewith prepare the decision making of CSA’s IT management under the project management of Mary-Lyn Harrison. For the project team, the implementation of the full-integrated Travel Management solution from SAP seems to be the most coherent step, but the IT management has doubts if this solution would match CSA’s very individual requirements. Therefore, also alternative technical solutions and recommendations of how the process can be improved should be strongly emphasized. Overall, the project objective is to identify the most suitable Travel Management solution, prepare its implementation within the upgrade project, and recommend how the business travel process should be red signed and improved.

Project Review and Findings

The project team started with a collection of all available data at CSA related to the business process and interviewed Ken Blake, the business process improvement manager, and Mary-Lyn Harrison. Ken, who selected the business process with a high priority for reengineering, presumes that some business trips might be not required. Furthermore, Ken wonders why no statistical data about business travels are available to report to the senior management and also why the GST of travel and travel-related expenses can often not be claimed back from the tax office. The goods and services tax(GST) was only introduced in Australia with July 1, 2000. For most organizations, never dealt before with GST, this was challenging and led to enormous changes within their financial management. The document in Exhibit 1 was created during a first project meeting with Mary-Lyn and Ken.

The project team took this information as initiation to follow the flow of the above documents and identify their origin and transformation within the process. Further it analyzed interview results from travelers in order to evaluate travel patterns. This enabled the team after several weeks of work to describe the process on an abstract level with two incidences, A and B

CHALLENGES AND PROBLEMS FACING CSA

The textual process description facilitated the project team to identify the following core processes, which were captured in a value chain, as shown in Figure 3. This value chain should establish a common understanding of the business process and should help to structure all reengineering efforts.

The project team decided to skip over the development of as-is process models in order to save time, because the SAP R/3 upgrade project was to become finalized. A further argument of the project team was that process models become useless after the process analysis. The project team reported all findings and identified processes to Ken Blake, the business process improvement manager. The next initial project step would be the identification and analysis of organizational and IT issues within the business process. It needs to be investigated where resources are wasted, process steps can be automated or data digitalized. This analysis should be presented in a milestone meeting to general management, IT management and process management. After this milestone the IT management is supposed to undertake the final decision if the SAP R/3 Travel Management solution should be utilized or alternative solutions should be investigated.

Ken Blake has high expectations on the process analysis and from here derived alternative solutions based on best practices for Travel Management. Oppositely he is afraid that there will be still a high uncertainty about various issues which can not be solved or considered in the solutions, because simply insufficient data are available and the complexity is too high. One of his concerns is the high limitation by the travel policy.The project team is thinking to categorize all travelers into frequent, casual and nonfrequent travelers to establish travel profiles which will be treated in a same way. These travel profiles would determine the travel policy. To some extent Ken would also like to focus on an organization-wide corporate card solution for travel expenses in order to streamline travel expenses. The IT management of CSA informed Ken after investigations that it would be not a feasible solution to provide to every traveler access to the SAP R/3 system. This would cause enormous licensing costs for SAP R/3, which can hardly be justified to CSA’s client departments ID and RD.

Travel Industry Background

The following trends and statistics given by the Travel Industry Association of America and the Travel Industry World Yearbook give an insight into the travel industry (Waters & Milman, 2001).

-The U.S. civilian government spent some $3 billion on travel in fiscal 1999; the Defense Department about $5 billion; and the Department of Transportation, $273 million.

-Asian-American travel volume has grown 7% from 1997 to 1999, increasing from 28.5 million to 30.4 million person-trips. Business trips represent 3 in 10 of the total person-trips taken by this group. (Source: The Minority Traveler, 2000 Edition) Business travel has grown slightly since 1998, to 212.3 million person-trips in 1999.

-Thirty-six percent travel by airplane. Among overnight business trips, 85% stayed in a hotel or motel, which is up from 82% in 1998. (Source: Survey of Business Travelers)

-The number of airline passengers worldwide in 1999 grew by 3.8% over 1998, to 1.34 billion.

Corporate travel expenses are an integral part of every company’s budgetary concerns. Sometimes, these expenditures are even unaccounted in the organization’s annual budget. Travel and related expenses account on average for 7% of the total operating costs, which are escalating to be the second largest controllable corporate expense. Travel costs were rising from 1996 to 1998 up to 13% and at the same time travel supplier commissions were cut. Where do these developments result from and who are the players in the travel industry? The travel market is not very transparent. The number of more than 125 airlines worldwide presents that the existence of many market participants, such as hotels, airlines, wholesale and retail travel agencies, and car rentals, makes the travel business very complex. The travel industry was throughout the 1990s one of the largest industries. The fact that about half of all travelers were business travelers indicates the importance of traveling for business purposes (Farhoomand, 2001 
The increased popularity of network organizations and a trend towards outsourcing inten- sified the integration of organizations with their environment. Reasons to travel are attendance at conferences, workshops and training sessions and visits of business partners such as customers, prospectors, vendors, banks, logistical service providers, etc. Employees undertake also necessary travels for doing business. This includes activities as a part of mobile sales and services.

The travel market suppliers provide two main products which a business traveler requires: transport and accommodation. In most cases travel service suppliers do not directly distribute their services to the market. The services are sold to intermediary travel agencies, who allocate demand and supply as wholesalers or retailers to their customers. The various travel services are demanded by organizations, which consolidate the need for business travels of their employees. This demand is driven by the diverse travel purposes of each single business traveler. In comparison to leisure travelers, business travelers know their travel details and need far less time, assistance and expertise from travel agents. Note the organizational demand is less elastic to prices and economic conditions and therefore the profit margins are lower than in the leisure market. Profit margins in the business travel market are only about 5% (American Express, 1999).

Several different trends can be pointed out within the business travel market. Tight functional and financial relationships between suppliers and intermediaries characterize the market. For example, travel agencies are since the 1970s functionally linked to service suppliers via computer reservation systems (CRS). More than 70% of airline bookings are made through travel agents via CRS. The CRS with the highest market share, between 22% and 27%, are Amadeus, Sabre and Galileo. They enable travel agents and travel service providers to market and sell travel around the world. In addition, over 100 airlines and other travel service providers optimize their internal operational requirements and use the modular technology of CRS (Farhoomand, 2001).

The traditional supply chain and interconnections of the business travel market are shown in Appendix 4. But organizations do not necessarily purchase all travel services from services suppliers. For example, organizations, in particular most government organizations, tend to support their own car fleets. That means organizations disclaim external purchases from car rentals if they reach the break-even point to support their own fleets. In conclusion, dependent on their travel demand, organizations have to undertake classical make-or-buy decisions. A major movement of the travel industry is based on the development of the Internet. New technology offers organizations to purchase business travel services directly from the service supplier with increased buying power.

The need for intermediary travel agents reduces and therefore distribution and sales costs decrease. Buyers access directly the CRS of travel service suppliers and eliminate in this way parts of the legendary supply chain. Organizations have recently tended to establish long-term relationships with either service suppliers directly or with selected travel agencies. The underlying purpose of fixed contracts is to reduce transaction costs due to the stability of the relationship. Organizations want to ensure that travel suppliers are providing the most efficient, cost-effective travel services in congruence with their travel policies. Travel policies provide within each organization the backdrop for undertaking business travels. Organizations set up travel policies in order to streamline internally the need for travel in terms of purposes and expenses and to facilitate travel management. Travel policies advise when and for how much cost an employee is authorized to undertake business travels. This authorization is mostly dependant on the employee’s position and responsibility.

Marit Schallert (MBA) is associate lecturer at the School of Information Systems, Queensland University of Technology (QUT), Brisbane, Australia. She received her MBA from the University of Münster, Germany, in 1999 and also studied at the Copenhagen Business School, Denmark. Her main areas of research are enterprise systems, enterprise architecture, business process engineering and process modelling. Marit has comprehensive consulting experiences through projects in the telecommunication industry and in the public sector. These experiences span from a project at German Telecom to achieve the ISO 9000 qualification to an e-procurement project in the Australian Public Health Services.

 

 


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  • Title: BUSINESS PROCESS REDESIGN IN TRAVEL MANAGEMENT
  • Price: £ 139
  • Post Date: 2018-11-09T09:47:04+00:00
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