Managing Relocation Services While Maintaining Employee Benefits
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Managing Relocation Services While Maintaining Employee Benefits
- 1. Managing Relocation Spend While Maintaining Employee Benefits Presented By Frank Corris
- 2. Relocation Programs Program Type Description Tiered Relocation In a tiered system, employees receive different amounts of support depending on their job level or job status (i.e., new hire). Higher-level employees may receive extended benefits such as home sale assistance or even a home buyout. Non-Exempt Relocation Non-Exempt or hourly employees receive relocation support as driven by union negotiations and dependent on terms and reasons for relocation. Full Relocation Employees receive full relocation support, which does not differ by employee level. Managed Move Employees receive cafeteria-style plan that has ten or more components. Components received are dependent on manager’s discretion and employee need. Lump Sum Employees receive a lump sum for relocation expenses, calculated as a certain amount of salary and dependent on job grade level.
- 3. Program Administration Each company has their own specific approach to Relocation Services Small companies normally outsource the entire program Larger companies often use a partially outsourced solution Very few companies do it all themselves
- 4. Typical Services 51% 38% 33% 30% 28% 25% 24% 24% 23% 19% 3% 0% 20% 40% 60% 80% R ealEstate S ales/P urchase C ontractofH ousehold G oods Transportation Arrange Fam ily Transportation/A ccom m odations C ounseling -Planning & D etails ofM oving O rientation Tours M onitorShipm ent Audit/Paym entofInvoice Em ployee C laim s Assistance C ounseling -C om pany Policy Supplem entary S ervices O ther Services Outsourced to a Relocation Service or Brokerage Firm in 2002 Total Services Outsourced Source: 2006Atlas World Group, Inc.
- 5. Benchmarking Policy In the 2006 Atlas study, the following points were identified: Companies carried an average of 1.9 standing contracts with household goods carriers The most important attributes when selecting a carrier were: - Service (85%) - Reputation (60%) - Price (57%) -Claims processing (47%) -Local agent (46%) -Technology (28%) The most important attributes when evaluating a carrier were: - Service (88%) -Employee feedback (78%) -On-time delivery (78%) - Price (60%) - Claims processing (49%) -Extra services (30%) -Online Customer Tools (22%) Source: 2006 Atlas World Group, Inc.
- 6. Benchmarking Policy Historical Review of Policies and Cost Review policies and perform industry standards calibration Use bottom-up approach to identify all suppliers with scope and services affecting relocation, including: Household Goods Movement Temporary or Corporate Housing Real Estate Agents for both Purchase and Sell Orientation Tour Companies Conduct annual spend analysis for the previous 2-3 years with all current providers. Use their subject-matter expertise! Look for other category spend that might be aggregated into this commodity.
- 7. Today’s Topics Household Goods Temporary Accommodations Real Estate Services
- 9. What Am I Looking For? Household Goods are related to specific tariffs for HHG and vehicle transportation Sourcing event bidding is normally based upon percentage discounts off the tariffs Go beyond the discount for additional savings: Storage In Transit (SIT) Valuation (insurance) Fuel service charges
- 10. Industry Conditions Department of Energy Two Year Fuel Surcharge Adjustments for HHG and Auto Movement 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 FSC 400N FSC 417E
- 11. 2004 Origins By Region 53% 27% 18% 2%
- 12. 2004 Destinations By Region 83% 8% 9% .5%
- 13. Savings By Category Category Percentage Change 1st Year Dollar Savings 2nd Year Fuel 6.5% 6.5% Line Haul/Tariff 3.0% 3.0% Valuation of $100K 2.5% 2.5% Waiver of 104 0.5% 0.5% Combined SIT 0.5% 0.5% Auto 1.0% 1.0% Rate Lock 2nd Year 0.0% 3.0% Total 14.0% 17.0%
- 14. Service Improvements All Tier I van lines have a priority program for large national accounts. The goals of the programs are: to achieve 100% on-time loading and 100% on-time delivery to assign only top quality van operators on the shipments, to provide quality labor In essence, do whatever it takes to satisfy the customer Planners and managers from all operating regions use reports daily to aggressively track the progress of the shipments from origin to destination
- 15. Service Improvements (cont.) When selecting a van line, examine their internal performance evaluation systems. Always choose agents that fall in the van line’s top 10% Stay within a given van line to aggregate the spend. You want to be a larger fish in a small pond. This also allows you to: coordinate all moves with one van line standardize service level commitments standardized reports, quality metrics and claims processing Note: You may designate an “agent of record” or have several agents while maintaining the aggregation of the spend within one van line. If you have one van line, the pressure to ensure a percentage of supplier diversity spend can become a service level agreement
- 16. Service Improvements (cont.) Look closely at claims management and days for turnaround on claims payment Full Value Protection:any items lost or damaged while in Carrier's custody, Carrier will either repair, replace with like-kind or pay the replacement value of such item, at Carrier's option Carrier will be responsible for the actual replacement value of article(s) lost or damaged beyond repair
- 17. Service Improvements (cont.) Auto insurance – the van lines will include $25K for basic auto insurance. Reference NADA book value so that employees don’t over insure their auto with their own concocted values Use car carriers when possible to avoid $300 to $500 in up charges per vehicle if they are moved inside the moving van Statistics prove that vehicles moved on car carriers have 17% less claimed damage than those moved inside a trailer
- 19. Temporary Housing Services Short-term apartment with furnishings Customized amenities that might include: Standardized furnishings with condo accruements Telephone, cable and high-speed Internet Maid and linen services Gift baskets for employees and employees with families Increasing interest rates/slow construction have resulted in high apartment occupancy – prices rise with increased demand
- 20. National Account Benefits Aggregated spend across all locations No security deposit No application fees Flexible lease terms, with short- and long-term options Direct billing for corporate accounts Major credit cards and P-Cards accepted Limited corporate liability
- 21. What Am I Looking For? For known areas, establish properties of preference Identify number of night stays you book per year in each location and by apartment type When you have statistics, talk to the management company that operates the property for the owner The management company may offer Temporary Housing or identify a preferred agency The best deals go to the agency that controls the most property inventory by location
- 23. Real Estate Services Home sale, finding and purchase assistance Home sale or buy-out assistance Closing costs reimbursements Home finding assistance Lease breaking reimbursements Mortgage, loan or down payment assistance Final move, travel and family assistance Final move assistance Movement of household goods Family and/or spousal assistance Monetary, tax and compensation assistance Miscellaneous or incidental allowance Tax gross-ups Excerpts from 2003 Corporate Executive Board
- 24. What Am I Looking For? Look carefully at both the buy and sell side of the equation Use destination knowledge to negotiate with real estate companies, brokers and agents to reduce cost to the company and the employee Special negotiations can include splitting the commission with the company’s broker
- 25. 7% 5% 8% 23% 73% 0% 20% 40% 60% 80% 100% Other Transportation Procurement Relocation Human Resources Policy Administration Q.17a – Which Department(s) at Your Company Select the Household Goods Carrier?* 2006 Atlas World Group Inc. The 2006 Atlas World Group Survey reported that “mid-size & large companies are also more likely than small firms to have more than one department involved in selecting the carrier.”
- 26. Summary How do I become a valuable partner to Human Resources? Without the HR data, procurement analysis is impossible How do I start this process and gain access to spend data? How do I add value to the process?
- 27. Questions Open for questions
- 28. Contact Information Frank Corris Limited Logistics Services Two Limited Parkway Columbus, OH 43147 Email: fcorris@limited-logistics.com
Editor's Notes
- Please allow me to introduce myself. I am Frank Corris and I am a Category Manager in Strategic Procurement at Limited Brands. Limited Brands is a specialty retailer that owns and operates Victoria Secret, Bath and Body Works, White Barn Candle Company, Henri Bendel, Express, and The Limited Stores. In general, our group services the Brands and Center-lead functions by providing internal strategic procurement consulting services that include business process evaluations, benchmarking, sourcing events, and total cost analysis. My particular categories are the Center-lead functions and services; such as, Human Resources, Shared Services, Legal, Financial and Professional services spanning $600,000,000 in annual spend.
- Each company can have one or more program types to address to needs of their workforce. These are examples of the most common program types. The lump sum is gaining popularity but it places a substantial burden on the employee during the same time they are trying to acclimate to a new job.
- Small companies normally outsource the entire relocation program management because they may lack the internal expertise and/or their spend volume is not high enough to get the best pricing. A buying consortium or relocation management company can be selected to provide both expertise and aggregate all of their clients’ spend to get better pricing for the member or client. Larger companies will use a blended process that is partially outsourced. They normally have significant volume in the top three spend categories to conduct their own sourcing events. Full internal management of a relocation program that included the buy and sell of employees homes would need to include a real estate brokers license in-house. For that reason alone most companies will outsource that service.
- Understanding where the spend occurs is the first step in the process. As you can see; real estate, household goods movement and accommodations are the top three spend categories as evidenced in this 2003 survey conducted by Atlas World Group. Remember that using the lump sum methodology means that the employee is on their own to acquire these services without benefit of volume discounts.
- Notice that these questions are relatively the same for when “selecting” and “evaluating.” My initial impression of the survey question results was the feeling that the services are purchased on subjective or emotional evaluation and not related to empirical data. Before writing the RFP, I knew that it would be important to build a business case that would drive the best decision vs. the need for an emotional buy.
- Benchmarking the relocation policies is the foundation block of the process. The benchmarking becomes a training opportunity for the Procurement partner to add some subject matter expertise (SME) where it may have not existed. Benchmarking ensures that you know what you are buying and safeguards that you didn’t just get a lower pricing on something that you didn't need to buy. Keep in mind, the top three spend categories are real estate, household goods movement and temporary accommodations. Your spend analysis should cover 2-3 years in order to look at trending. Fuel remains a volatile component of any analysis involving transportation contracts. Get help from a transportation SME when sourcing House Hold Goods. Go through one of your billing statements and make sure that use can perform all of the calculations related to the discount of the tariff rates. Interview all incumbent providers and ask them to come prepared to present savings opportunities and process improvements. If you can not get good data internally, the incumbent service providers have everything you need. They know their industry and your business both emotionally and statistically. Take the time to listen and build a relationship here as well. Process improvements will save money and ensure sustainability savings over a longer period of time. The suppliers are very good at reinforcing your company’s written policy. For your enterprise, the process change is more important than unit cost savings.
- Common tariffs used to the transportation of House Hold Goods is the 400N. The referenced tariff for the shipment of an employee’s vehicles is the 417e. The bidding event normally focuses on the discount off of the tariff rates. Too little discount and you are not maximizing your savings. Too much discount and driver’s will not take your shipment in the heavy-demand summer months. SIT is uniform across the van line network. However, deeper discount can be had from the agent of record.
- Because the Fuel Surcharge is based upon the same index, the two fuel surcharges are synchronic. As stated earlier, the Fuel Service Charge is normally added to the invoice as a percentage of the line haul cost. This method, that was intended to make the driver whole, can overcompensate the driver for the cost of fuel. Ask your carrier for a mileage based Fuel Service Charge as it will reduce your total invoice by 5% to 7%.
- Origins and destination are important evaluation points when looking at any transportation contract. You need to choose an agent (s) that are strategically located in the sweet spot between your origins and destinations. The ideal situation is that your agent self-hauls your employee’s house hold goods and has sole responsibility from cradle to grave. This ties into the employee satisfaction surveys and also the Service Level Agreements with the van lines.
- One of our finalists was a agent located in California. Although highly-rated the California home base did not work well when we determined that 92% of our destination were east of the Mississippi. That also meant that most of our Storage-in-Transit costs were also at the destination and we had deeper discounts from our agents-of-record for storage in their own facilities vs. those in the system.
- In this slide you can see the savings by category. Most sourcing events concentrate on the discount off of the line haul/tariff and the discount off Storage-In-Transit (SIT). However, you have to dig into the service agreement language to negotiate the details for a multi-year rate lock, waiver of the 104 (special rates for high cost cities) and fuel surcharges.
- If you have more that $2MM/year in HHG spend, you are large enough to get the ANY van line’s best discounts. Smaller companies may chose to use a Relocation Management company or a group purchasing organization to get the best rates. Understand that neither of these groups work for free, they will take from 1 to 3 points as compensation for their service. Another alternative is to look at a Tier II provider to maintain the big fish in a small pond arrangement.
- The van lines are operating mature businesses and all of the major carriers have mature satisfaction surveys that are vertically integrated with their internal compensation and rewards programs. Learn to integrate their surveys into your contract’s Service Level Agreements (SLA). Designing your own program only adds confusion and a new learning curve to the process. Accept the existing standardization and use it to your advantage.
- Regardless of your relocation policies, employee inevitably find ways to sky rocket your costs. Ninety-seven percent of our HHG moves were over insured in 2005. If you don’t reference NADA book value, the employee is asked by the van lines to state fair market value to determine insurance levels. Most van lines will agree to give the car carrier rate for all moves if their driver can make the determination to move the vehicles in the trailer or on a designated car carrier transport vehicle.
- As you saw in the earlier table, the change to the process for transporting vehicles resulted in a 1% total invoice cost reduction. The van lines traditionally offer $25,000 in vehicle insurance. It is nearly impossible to suffer that much damage; thus, that level of insurance is normally adequate. Additional insurance is available but ensure that the terms for addition insurance are at the per one hundred level. Some companies make you buy in increments of $10,000, creating the possibility of an over insured situation.
- The National Association of Realtors reported this summer that apartment rents are expected to rise over 5.3%. The increase is double that of 2005 and the largest since 2000. In the larger metropolitan areas, former apartment buildings are being converted to condos. One out of three apartment buildings sold lat year were converted to condos resulting in a a market reduction of 191,400 apartments. As home interest rates continue to rise apartments see higher utilization. Do not expect a significant save in this area but prepare your agreements to hedge inflation.
- It is important that you take time to meet the property owner(s) if possible. They need to know how much spend you represent in the number of night stays. The Temp Housing providers get their lease rate based upon the total amount of inventory they lease from the property owner. This is more about them than about you. If there is not a strong relationship between the Temp Housing provider and the property owner, you can not make the property work in your best interest. You will need to select another property or another provider. This material is the basis for a series of question in any sourcing event for Temp Housing.
- Third party vendors usually have real estate broker licenses that allow them to collect referral fees that can be shared by the employer and used to offset other relocation costs. A company can work closely with a designated real estate agent on the buying side of the equation to secure agent that only represent the buyer. Fees can also be collected and shared with the company. Agents and brokers are quick to negotiate as the company is delivering a qualified buyer to their doorstep. In most case it is a guaranteed purchase.
- In order get on the inside of HR, look at developing a cross-functional team that includes the Procurement partner, the HR end user, a financial analyst and if possible a transportation subject matter expert. The team will make the best selection for your company by using empirical data to substantiate their business case.. Look for an uneven number of participants on the cross-functional team so that a majority rule can work for decision making. Look to the current provider(s) for annual spend data, look at a transportation invoice and learn how to read in fluently. Compare supplier data to in-house data to ensure they are in concert. Look for areas that do not align financially and dig deeper.
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