PROCUREMENT IN HOSPITALITY5 WAYS TO ADD 5-STAR VALUE
The unique importance of procurement in the hospitality industry
by Spencer Chambers, VP of Product & Strategic Initiatives
In the hospitality industry, procurement occupies a place of unique importance. Within most other industries, procurement provides value by supplying the organization efficiently. Within the hospitality industry, procurement produces value by supplying the optimal quality and quantity of goods and services as a function of customer service. Increasingly, traditional hotels find themselves caught in fierce competition with boutique-style accommodations provided by Airbnb and VRBO, fighting to cut costs without sacrificing quality or user experience. Below are 5 ways procurement professionals can add value without compromise.
1. Improve demand projections
In any strategic procurement situation, it’s important to know your market and be able to project your needs. If you buy too little of something, you’ll run out too quickly and people won’t be able to get what they need to maintain the guest experience. If you buy too much, it will end up sitting around, occupying valuable space, without being used.
Whether too little or too much, either situation ultimately leads to a loss of money for your organization and carries the risk of negatively impacting guests. Analyzing and understanding the demand for each item you buy will help you forecast exactly how much you need to buy at a time, and when you need to restock to ensure that delivery happens just in time.
2. Build strong vendor relationships
It’s easy to think of vendors simply as the necessary intermediary between you and the products and services you’re procuring — a combative relationship where your goal is to pay the lowest price and theirs is to charge the highest. But when you think of your suppliers as partners in your business, the relationship becomes more collaborative than combative.
In a partnership type of relationship, you can encourage the vendor to increase quality and service, and the vendor knows that by doing this they will see a renewed contract with guaranteed sales. To build partnerships, start by negotiating fairly and openly, paying them promptly according to terms, strategizing with them about sourcing new items, sharing your purchasing forecasts, and asking for their recommendations for ways to lower costs. Strong vendor relationships help you ensure consistency in products and services — consistency your guests are counting on.
3. Leverage supplier catalogs
All your hard work to establish preferred supplier agreements offering the best terms and pricing are tested when someone in the organization needs to buy something. Guided buying catalogs are an easy and effective way to direct users to the right items, the right policies, and your preferred suppliers.
Create catalogs by vendor, location, department, or even type of item (think Office Supplies) to make it simple for shoppers to locate the items they’re looking for. By limiting the purchase of many routine items to your preferred list of vendors and products, you can reign in maverick spending and reduce the need for procurement department involvement—both of which promote efficiency and add value and bring more spend under your direct control.
4. Centralize purchasing
Centralized purchasing is one of the single most important ways to reduce unmanaged spending. When purchasing is decentralized, your organization is deprived of the visibility it needs to make smart, strategic decisions. And, if you can’t accurately assess what is being spent, on what and by whom, how can you manage it effectively?
Centralizing spending increases your company’s purchasing power and helps achieve economies of scale. It makes it easier to provide careful scrutiny of suppliers and their contracts. And, it speeds and simplifies internal fulfillment functions, so you can maximize the inventory you already own.
5. Focus on value instead of savings
While cost control will always remain a paramount goal of the procurement department, procurement professionals can add value to the process — by focusing on value.
Selecting the cheapest products, or selecting a vendor solely based on pricing often costs more money than it saves. The cheapest products will fail more quickly and need to be replaced more frequently. Bargain vendors may be less likely to stand behind their products in the event of quality issues. So, shop around, do some research, and find out which products are truly the best value, and which suppliers can reliably deliver quality products at competitive pricing. You may end up paying a bit more at first, but it will help you save much more in the long run.
Peak Resorts – Purchasing & Expense Success Story
Check out how Peak Resorts has improved its procurement process here, and read more about adding value to the procurement process in our Guide to Procurement for the Hospitality Industry.
“With Paramount WorkPlace, we have centralized purchasing, automated routing and approval workflows, and a high level of visibility into our entire purchasing and expense management cycles.”
Gary Rush, Senior VP of IT, Peak Resorts
About the author:
Spencer Chambers is the VP of Product and Strategic Initiatives at Paramount WorkPlace. He leads product and strategic initiatives working with internal and partner sales, delivery and technology teams to identify and develop new opportunities to leverage the strengths of Paramount WorkPlace and deliver robust solutions to the market. He is passionate that the simple philosophy of bringing people, processes and software together as the core ingredients to any business solution is the key to success. Prior to joining Paramount in 2010, Spencer had 15 years of experience with business application design, development and implementation. Leading sales, consulting and development teams to deliver comprehensive enterprise software solutions has resulted in a wealth of experience and relationships that he values in equal measure. Spencer holds a BA (Hons.) degree from the University of Waterloo in Ontario, Canada. He enjoys spending his free time with family and friends, sunshine, reading, home renovations, custom PC building, and raccoon wrangling. Learn more at www.paramountworkplace.com.