Procurement – the hidden business lever in the hospitality sector

19 November 2021 by
Procurement – the hidden business lever in the hospitality sector

By Gavin Bowen-Ashwin and Jonathan Williams

The upcoming year promises to be an interesting, dynamic, and no doubt a challenging year for everyone in the hospitality and leisure industry. In the build-up to 2022, however, we need to consider what has changed in the marketplace since the pre-Covid days, and how we therefore minimise risk and maximise opportunities as we move into the next year. And procurement can be one of the most significant business levers you have available to you.

A successful post-pandemic strategy requires building a strong plan for hospitality businesses and ensuring that the plans are aligned within the supply chain. Businesses need to make sure they stay ahead of industry and market trends to capture changing consumer perceptions and choices. Millennials, for example, are now the driving force in many parts of the hospitality sector – but is your product or service offering aligned to their thinking? Millennials are twice as likely to support and utilise organisations with a strong sustainable and environmental focus and particularly those that communicate it well through their media channels.

Strong category plans within procurement and supply chain will be fundamental to ensure that your supply base remains aligned to be business direction of travel and as a strong and effective partner to the business. Now is the time to reconsider your buying behaviours to deliver commercial and quality benefits and consider if your supply partners' margins are improving at the expense of your own.

Should 2022 be the year to rethink your organisations approach to distribution in order to become more efficient and deliver significant commercial savings? Are your distributors over-servicing the real needs of your business? For example, do you get daily deliveries when less frequent would easily suffice, or could you consolidate multiple deliveries on to a single truck, reducing the number of vehicles, drivers and invoices that are required?

Corporate services spend within your organisation, such as property, IT, marketing, or logistics, can easily account for 20% of an organisation's total spend, but are very rarely given the same focus as other product lines, such as customer-facing goods or services. Effective procurement management of this spend can easily reduce costs by double-digit percentages which will drop straight through to the bottom line.

A lack of current measurement of key performance indicators within your supply chain is likely to directly equal a meaningful profit improvement opportunity. To help ensure that we can improve the chances of 2022 being a great year, let's try and get it right the first time. Engagement with procurement teams will be key to this success, as they can not only effectively tender goods and services to drive enhanced value, but also deliver robust SRM and contract management programmes which will further significantly enhance the profitability of the organisation.

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