The future of hospitality procurement

The future of hospitality procurement

By 

Omri Shalev

Ex-Microsoft | "People savvy & tech person" | Co-founder & CTO at Reeco

Published 

January 18, 2022

The future of hospitality procurement

Looking back at the Egyptians in 3,000 BC, we could see the first traces of procurement.
Back then when you wanted to build great pyramids, you needed to start with sourcing contracts – “you give me bricks, and I’ll give you gold in return”, making sure you meet budget – “how many coins do we have left to finish up?” and last, make sure your daily fast-moving orders are flowing so nothing is stuck. Sounds familiar?



Luckily, we have a title for that today - “purchasing officer” and since the ancient days of Egypt, the industry with no doubt did a long journey,  we moved from the Egyptian hieroglyphs to English, runners were replaced with mobile phones/emails ,and donkeys can finally live peacefully in nature, leaving the heavy lifting for  trucks.



But, is it a fair comparison? how about we look at the procurement’s technology in hotels compared to the rooms one.
The rooms department is at its top of the game, you can book a room from the other side of the world, AI makes sure your pricing is based on real time Supply & Demand to stay optimal, you can easily publish your rooms in multiple website like Booking, Expedia, Trip Advisor and others to reach out more customers than ever! Can you say the same thing about procurement ?

What happened in the procurement space in the last couple of years? Looking at the software evolutions from a bird’s eye view, we can see procurement faces 2 major issues:

  1. Moving from papers to digital – taking papers, excels and other old methods into comfortable ERP solutions, so the old fashion department can communicate with others such as accounting easily.
  2. Purchasing decisions – Choosing the right deal on your repeated purchases every single day.

The first problem is already on a fast-track by multiple tech companies, without stating names, I think they are doing a great job. They let you upload your PDF catalogues into the system, place a purchasing request, start a signature flow with accounting and plenty of other nice features.
Sounds pretty good and efficient, at least compared to the Egyptians we are in the future.

I’d like to focus today on the 2nd problem, how can we as procurement officers, F&B directors, chefs, house-keeping managers or any other department's manager, make sure we get the right decision every-day on our repeated purchases. Can you say that your buy efficient? at the best possible price? that you get value for money?

Not by surprise you are scratching your head right now, this problem hasn’t been solved yet, and the reasons are:

  1. We don’t have real time data to choose right.
  2. Lack of transparency – your DSR (Distributor sales representative) is your source of truth.
  3. Catalogues are a mess; you can’t compare apples to apples if one supplier calls it a “nice apple” and other one calls it a “great apple” while it’s the same apple!
  4. You are chained to 1-2 manufactures/distributors/suppliers/vendors however you want to call them with strict contracts – “you have to order 80% from me otherwise you are out”, “order only from me and get rebates at the end of year”, “Want better credits? Order only from me and get NET 30” and many other quotes I am sure you hear all the time.
“Hotels get prettier from the outside every single day, but from the inside, things don’t change”

So why no one is tackling this problem? It's because we all fall into comfort zone.

  • “We should focus on getting more reservations, let’s make a prettier website, increase our marketing budget, this is the only way to improve our bottom line” –
  • “We already get the best prices from Sysco - we have great personal connections there ” – how do you know that if you compare once a quarter on products that change every single day?
  • Our users are not very technological – If there is one thing COVID-19 did good to us, is technological acceleration . My grandfather orders food from Door Dash twice a week!

Please forgive me for being harsh here, but when I talk to purchasing mangers on Zoom, they all sit in a dark room, with 30Kg bag of rice and a bucket of Ketchup behind them, although they manage millions of dollars in budget every year!!

I hope you understand by now there is a room for improvements here, so what do I suggest?

The answer is very simple, bring procurement officers to the front, with technology. It’s time for AI and data to be the building blocks of this department.
Why things in the B2B industry don’t work like in the B2C world? All you have to do is to pick the products you need, select supplier/s you want, track orders online, pay digitally and Voilà, you can now focus on what’s important - which is of course, making strategic planning, showing your colleagues you rock and get a better bottom line, after all it’s all about the numbers, if you show saving to your GM then you are the hero my friend.

 

Don’t fall into convenience, it’s time in 2022 to step up your game with technology, why survive when you can just live!

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