FutureLog’s Contribution to the Hotel Yearbook 2024

The practice of sourcing and buying all the necessities required to run a hotel, restaurant or other venue, hospitality procurement includes everything from the sheets on the beds to the fresh food in the kitchen.

Procurement manages purchases, contracts and inventory, and effective procurement strategies are key to controlling costs and ensuring smooth operations. While a good revenue strategy is also important, it is the meticulous execution of a robust procurement strategy that truly leaves a tangible impact on the profit and loss statement. Efficient procurement translates every dollar saved directly into improved financial health, a distinction not easily mirrored by revenue alone.

But procurement is not just about saving costs; it also contributes to upholding your brand's reputation, pleasing your customers, and keeping up with ever-changing market trends. Let’s explore some of hospitality procurement's key do’s and don’ts.

Procurement in the hotel industry isn’t just about buying what you need, but also about making practical and wise purchases. Let's break down the steps to winning at procurement.

1. Mastering the Basics of Procurement:

Firstly, you need a plan. This means knowing what you have, what you need, and when you need it. It also means doing your homework about market trends and prices to get the best value for money. Next, build solid relationships with suppliers. Communicate openly, work through problems together, and strive for solutions that benefit both parties.

2. Optimizing Supplier Relationships and Negotiations: 

In dealing with suppliers, aim for strong, long-lasting partnerships. Loyalty can lead to better prices, top-notch service, and access to useful insider tips. Remember to pay promptly, provide helpful input, and help them grow. A win-win approach turns suppliers into valuable business allies. Look for cost savings like volume discounts or bundled services, but never at the expense of quality. Cutting corners could hurt your brand and disappoint guests.

3. Value Your Data: 
Data is a tool that can highlight areas for improvement and places to save money in your procurement process. Ensure you have the right tools and know-how to analyze this data to make the best decisions.

4. Pay Attention to Risk Management & Legal Compliance: 
Be aware of potential risks involved in procurement, such as interruptions to the supply chain, issues with product quality, or your suppliers' financial stability. Have plans ready to counteract these risks. Additionally, ignoring Environmental, Social and Governance (ESG) factors has the potential to harm a hotel's reputation. Ensure compliance with labor laws and environmental regulations, check for sustainable practices, and keep carbon footprints in mind.

5. Keep Automation at the Fore: 
While it’s important that suppliers commit to delivering on time and meeting order specifications, it’s also crucial that they embrace digitization and automation, e.g., sending electronic delivery notes, etc. The long-term benefits, such as saving time and improving efficiency, are much more valuable than short-term cost savings.

1. Depending Only on a Few Suppliers: 
Depending too much on just a few suppliers is risky. For instance, your supply chain might fail if a primary supplier runs into trouble, like a materials shortage or a natural disaster. It's critical to have connections to multiple suppliers to avoid risks and guarantee an uninterrupted supply of goods and services.

2. Prioritizing Price Over Quality: 
Always remember that cutting costs should not compromise quality. Guests have high expectations, and to meet them, your goods and services must meet your brand's standards. If you cut corners to save money, you run the risk of disappointing your guests and harming your brand's reputation.

3. Not Keeping an Eye on Market Trends: 
It's essential to keep track of market trends and price changes. If you don't regularly check for linen price changes, you might miss an opportunity to upgrade your bedding when prices are low. This could improve guest satisfaction and lead to better reviews and repeat business. Staying up-to-date on market trends prepares you to take action when the opportunity arises.

4. Ignoring the Importance of Negotiating: 
Don't underestimate negotiation. It's more than bargaining for the lowest price. It's about finding solutions that benefit both parties involved. Good negotiators in hospitality understand their suppliers' needs and challenges. This leads to strong partnerships and can help improve business terms like payment conditions or getting priority service during busy times.

5. Underestimating the Importance of Time and Planning: 
Neglecting adequate planning time pushes you into an emergency procurement situation where choices are very limited. In this crisis mode, your bargaining power diminishes significantly, rendering effective negotiation strategies nearly impossible.
From an operational standpoint, the immediate necessity for products overrides careful selection, compelling you to accept whatever is available – a situation far from ideal. Strategically, expiring supplier contracts with no time for a comprehensive tendering process leave you vulnerable, jeopardizing favorable deals and long-term agreements.

6. Relying on Manual Processes or Legacy Technology: 
Modern procurement strategies can only exist with technology, and procure-to-pay (P2P) technology streamlines operations and provides insights for improved efficiency and cost reduction. Time is crucial in hospitality, and P2P technology helps automate routine tasks and provide real-time data. This enables quick decision-making and reduces manual errors. Paper-based systems have been replaced with digital ones for convenience. Analytics help track expenses, predict future costs and make informed purchase decisions.
P2P technology also fosters transparency and accountability, as all transactions can be traced and recorded. This minimizes fraud risks. These digital systems can quickly pinpoint discrepancies between orders and deliveries.

MISTAKES IN PROCUREMENT

Here are some real-world examples that show why procurement best practices matter.

Imagine a hotel that chose the lowest-priced food supplier without checking their reliability—the outcome was late and sometimes poor-quality deliveries. This caused guest complaints and even led to the hotel refunding some meals. In another case, a resort relied solely on one furniture supplier. When they halted production of a beloved furniture line, the resort had no choice but to spend heavily on interior redesign.

These real-world examples serve as stark reminders of the potential consequences of neglecting essential procurement steps. They clearly illustrate how taking shortcuts or not planning ahead can lead to significant financial losses and damage to one's reputation. This awareness can help avoid such pitfalls and ensure a more secure procurement process.

TAKEAWAYS

The rules of procurement in the hospitality industry carry significant operational weight, and efficient strategies involve being proactive, innovative, and strategic. One of the most crucial 'DO'S' is implementing technologies such as procure-to-pay (P2P) systems. These systems not only streamline procurement processes and digitize manual tasks but also empower you with real-time data and insights for improved efficiency and cost reduction. Your confidence in adapting to technological advancements can set you apart in the industry.

Mastering hospitality procurement's do's and don'ts can unlock significant value, potentially making the difference between meeting budget goals or surpassing them. By fostering strong relationships with suppliers, taking a proactive approach to risk and compliance, and intelligently using technology, you can streamline processes and yield substantial cost savings.

Prioritizing quality over price, paying attention to market trends, recognizing the importance of negotiation and avoiding reliance on a few suppliers will also help ensure your procurement strategy aligns with your hospitality goals. Embracing these principles will set your brand apart with high standards of service, a stronger bottom line and smoother operations while meeting and exceeding your guests' expectations.

Remember, in procurement, the way you do things matters as much as what you do.