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Procurement Challenges Influencing the Travel Industry

Oct 6, 2017

The fleet management industry along with the car rental industry traditionally runs on a razor-thin margin because of high overhead costs. The travel industry thus relies on optimization methodologies to increase their overall profits. The companies achieve this through the increased scale of operations, improving process efficiency, and providing comprehensive service portfolio. In general, the travel industry faces lots of procurement challenges regarding vendor selection, technology integration, order processing, and real-time tracking. Here are some of the procurement challenges faced by the fleet management market and car rental services market in the travel industry:

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  • The customers usually prefer having a wide range of selection to choose from while leasing out the car for purposes ranging from general commute to off-road trips. In such instances, the service provider should identify suppliers with a wide range of vehicles in their portfolio. Companies in the travel industry are facing challenges identifying suppliers that possess a wide range of vehicles such as economy cars, SUV, and luxury sedans
  • Engagement with suppliers is not over after the purchase of cars from the suppliers. The buyers require suppliers that can provide high-quality support services. It is challenging to locate suppliers having a well-established support network across the locations of engagement
  • A majority of companies in the travel industry are looking to abide by the emission standards and are thus preferring green vehicles. However, there are only a limited number of suppliers offering vehicles that run on alternative Lack of widespread availability of refueling options for such vehicles is hindering the success of green vehicles

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  • One of the most significant procurement challenge facing the fleet management services market is the inability to evaluate drivers’ riding behavior effectively. Increase in accident incidents can drive up repair costs and reduce vehicle performance. Players in this industry are trying to use data analytics to evaluate driver behavior effectively
  • In order to drive up economies of scale, fleet management companies usually follow the rule: The more, the merrier. However, there is a significant loss in opportunity costs as the majority of the vehicles stay idle.
  • Tracking vehicle status and getting every update about the activity in each of the vehicle is difficult across a large fleet. Such a lack of visibility over the maintenance process affects the maintenance of the fleet and increases the operational cost.

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