Talbot Partners is a consulting firm with clients across the nation. Within the company is a travel group that arranges flights and hotel accommodations for its over 2,000 consultants. The cost of operating the travel group (excluding the costs associated with actual travel such as hotel cost and air fare) amounts to approximately $1,200,000.
Recently, Talbot Partners conducted an ABM study that has determined the following:
1. Each consultant takes approximately 15 business trips per year.
2. On average, 30 percent of trips are rescheduled due to conflicts and poor planning.
3. The travel group employs 15 individuals at $50,000 each to book travel. In addition, there is a travel manager and an assistant travel manager.
4. Bench marking with a Talbot Partners client indicates that the client incurs $30 cost per completed trip to book travel.
Required:
a. Evaluate the cost incurred by Talbot Partners compared to the benchmark cost.
b. Talbot Partners is planning a process improvement initiative aimed at reducing scheduling conflicts. What would be the savings if rescheduling could be reduced by 50 percent? Assume that the only variable cost in travel services is the wages paid to employees who book travel.