Hotel purchasing: online procurement systems

25 April 2014
Hotel purchasing: online procurement systems

Hotel purchasing practices have transformed over the past decade from paper-based organised chaos to super-efficient one-click solutions. Elly Earls finds out about the benefits to hoteliers from online procurement systems

In association with

Alex Walters, European sales director for online purchasing solution provider iTradeNetwork, says: "We've seen very early adoption of eâ€'ordering among hotel groups - they've really been ahead of the curve. Thistle Hotels, for example, has been trading on our platforms for almost 10 years."

Cost control Hotel operators' increasing enthusiasm for online systems has, in part, been driven by rising raw material prices - particularly when it comes to food and drink.

"Raw goods prices have driven a great degree of price volatility - especially in dairy and meat products - which has had a significant adverse impact on food costs. Rising prices make it more challenging to creatively engineer a menu and deliver customer value," says Rikki Gajjar, financial controller at Crowne Plaza London - The City Hotel.

"Operators need to exercise stringent control over what tend to be the single largest purchases after payroll: food and beverage."

Control is one of the key selling points of today's online procurement systems as they ensure that 100% of a hotel or hotel group's spend is on contract, meaning the best prices can be negotiated and excellent discounts and rebates arranged with suppliers.

Indeed, for John Horvath, group hotel director at Cedar Court Hotels, who is aiming to switch the group to an online procurement system by September, increased control will be the main benefit he expects to see.

"The principal purpose behind moving to an online system is to improve margins," he says. "And you're really going to improve efficiencies in the organisation by ensuring you don't have rogue purchases - or panic purchases when someone's gone to the supermarket because they've not planned ahead."

The central control offered by the latest online purchasing platforms is arguably even more important for larger hotel chains. "It's extremely important that guests experience the same standards time after time, so management has to make sure the same set of products are being ordered," Walters explains.

"With our systems, various people can be involved in the ordering process, but head office have got clear visibility of what is being ordered and when, thanks to our live reports."

Angela Tomlinson, regional director of supply chain, Starwood Hotels Western Europe, agrees that consistency is key when it comes to hotel group purchasing. "If you have more than one property, it makes good business sense for the properties to align and consolidate the specification of products and services, sourcing from suppliers that can meet the needs of the entire business," she says.

"Central control over purchasing also gives the ability to leverage the brand, maintain quality standards and manage costs, as well as meeting CSR requirements. Having a central team can provide a greater trained resource, too, while allowing for fewer purchasing employees at individual properties."

Lighten the burden
The administrative burden of traditional purchasing is huge - both in terms of the time spent on the phone or scribbling down orders on paper - while the inconvenience of having to place orders at times when guests are checking in or out means hotel staff are often taken away from their customer-facing duties. Moreover, monitoring traditional purchasing practices effectively is close to impossible.

With online purchasing, these challenges are effectively removed. Not only are all paper trails eliminated, but hotel staff can order at times convenient to them.

"This is particularly important in the hotel sector, as the time suppliers would typically phone through for an order would be very busy," Walters explains. "Now, when we look at the ordering patterns from our customers, many are placed in the early hours of the morning."

Management are also able to track everything that goes through the supply chain at the click of a button - again, at any time. Says Horvath: "An online system means you can monitor your purchasing closely without having someone to do this employed full-time. Moreover, purchasing will take up much less of my time, so I can focus on our guests and the running of the hotels."

As Gajjar summarises: "Online procurement has allowed the purchasing process to become far more streamlined and simplified."

Growing market Over the years purchasing has had to adjust to a whole range of factors beyond its control. "These include market conditions, the recession and changes in the economy," says Tomlinson. "The world is a much smaller place, with customers demanding that certain products be available throughout the year."

She believes hotel purchasing is set to evolve further with online procurement at its centre. "Online products and services will continue to be a growth market. Developing markets will become savvier, which will doubtless have an effect on cost - often negative to the purchaser. Guests and customers' expectations will also continue to change and grow," she predicts, adding that she would like to see greater synergy across systems as well as improvements in security.

Providers of online purchasing solutions are only too aware that they must constantly keep up to date with industry and global trends, as well as the future needs of hoteliers. Indeed, at iTradeNetwork, Walters stresses, many features that currently exist are those that have been requested by users.

"Our permissions-based access - which means that various people can be involved in the ordering process, but that the order must not go through to the supplier without sign-off from head office - originated from a hotel customer request," he says. "Also, some of our live reporting capability came from a request from one of our hotel sector customers.

"Like all our customers, the hotel sector has its own specific challenges - it's because of these that it has been an early adopter. But it is also always challenging us to bring new technology to our systems."

And let's not forget mobile. When it comes to order placement, the hotel sector might not be the biggest user of mobile technology, but Walters sees a high percentage of users, such as regional managers, accessing reports and signing off orders via their smartphones.

Case study - Thistle Hotels
Since rolling out iTradeNetwork's Multiple Operator Portal, Thistle Hotels, which has been working with the provider for almost 10 years, has saved more than £150,000 a year.

The group, which is made up of 33 hotels in the UK, uses the system for all food, drink and housekeeping orders and believes it is "fifty times better in terms of reporting" than any system they had used before.

One of the key benefits of working with iTradeNetwork has been the range of products that can be purchased on the platform: everything from food and beverages to light equipment and utensils.

According to Alex Walters, European sales director for the online purchasing platform, this is something many of his hotel sector customers have commented on.

"If you've got to order from more than a dozen suppliers, ordering online gives increased benefits compared with other hospitality outlets, which only have to order from one or two suppliers.

"Moreover, our systems are roles and hierarchies-based, so a general manageris able to log on and have access to all suppliers, whereas a bar manager would see only the drinks supplier or suppliers. Those kinds of functions give really strong benefits to the hotel sector."

Thistle has certainly reaped these. Indeed, with at least five users at every hotel in the group, including the chef,bar manager, housekeeper, leisure manager and general manager, the ordering process was previously very complex. But, as iTradeNetwork's system is fully automated and ordering can be done at any time of the day, it now takes much less time for everyone involved, as well as being much less frustrating.

Live orders are also available immediately to view online and each day the system automatically sends copies of orders to the group's finance department to ensure compliance and to obtain purchasing authorisation.

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