Smart Purchasing

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To optimise the purchasing value of a hotel, today’s purchase managers are not only handling capital expenditures but day to day operations as well. Food & Hospitality World explores how these managers juggle purchasing, contracting, planning, receiving orders, scheduling in order to contribute to smart purchasing for a hotel

Purchasing of goods and services is not only important for a hotel’s operational performance but also makes a significant contribution to increasing its profit share. In a rapidly changing industry where new products quickly replace the old ones, the purchase managers have to make some very tough decisions within a restricted budget. Being in the purchase department requires smart choices on which products to use and also maintain an efficient relationship with the vendors.

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Swinky Shrivastava

Therefore, the managers need to create and adopt smart purchasing methods to deliver the best products leading to better service. With notable involvement of technology, managers are changing the way they function to attain a better level of coordination and efficiency. Swinky Shrivastava, purchase and stores manager, The Acacia Hotel & Spa, Goa, shares, “In today’s highly competitive market place, it’s imperative for business to innovate new ways to streamline the supply chain and optimise productivity. With the aid of modern technologies we create better visibility within our supply chain. This enables us to have more control over the business and stay ahead of the competition.”

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Nitin Nagrale

Through proper stalk updates, quick connection to buyers and efficiency in data collection, technology is assisting managers a great deal. Nitin Nagrale, vice president materials, Foodlink Restaurants India; founder and general secretary of Hospitality Purchasing Manager’s Forum (HPMF) who has also worked with chains like The Taj, Radisson, Jet Airways, Grand Hyatt among many others believes, “Now we are connected through the click of a button. It is only due to technology that we are quickly able to identify a problem in our supply chain management system which wasn’t the case before. Similarly, documentation and reaching out to new vendors has become easy as reply is received within minutes of initiating a deal.”

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Vijayanand Thantri

Technology can be an advantage or disadvantage based on one’s dependency on it, but majorly it has been an assisting factor for the managers. Speaking on how technology has evolved back end operations, Vijayanand Thantri, head procurement, Intellistay Hotels, adds, “As technology developments continue at a relentless pace, it can be difficult for hotels, leisure providers and those in hospitality to keep up with recent changes, let alone look to the future. However, the savings and improvements that technology can deliver mean that managers and directors really need to keep one eye on these six trends- cloud/ software as a service, mobility, social, personalised systems, integration and globalisation.”

Smart choice

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Ramesh Iyer

The products have also evolved over time and with new entrants in the market every month, it becomes all the more difficult to make the right choice. Hotels are investing in energy efficient products to attract the consumers and also save on cost in the long run. Ramesh Iyer, assistant vice president – material management, Deltin Group, Goa, states, “Energy efficient resources go hand in hand with customer satisfaction. Energy efficient equipment perform better than non energy efficient equipment. When we use energy efficient VRV in AC instead of normal HVAC it provides the same if not better comfort. Similarly, LED lights provide better light as compared to normal lights. Energy efficient water pumps provide more water to ensure continuous supply to the users. Heat pumps which are more energy efficient provide hot water better than conventional water heaters with less energy and less pollution than diesel fired water heaters. There are many such examples to confirm that energy efficient resources help to improve customer experience.”

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Ganpat Dalvi

Ganpat Dalvi, director of purchasing, Four Seasons Hotel, Mumbai, further explains, “Purchasing and procurement are not just essential but also the most progressive function of a company. The past few years have seen a huge shift in the demands placed on procurement teams – not just from a revenue and cost perspective, but also to meet customer demand. For food and beverage, that means you have to ensure that the brands and quality of the products you select within your procurement process all deliver on your promise. Guests are looking for new and exciting food. They’re also increasingly concerned about where the food and beverages came from. This can mean providing information about the source and whether it’s organic, free-range or gluten-free.”

The growth of budget hotel segment has given rise to the need of quality products within restricted budget. Shrivastava explains, “Keeping a budget hotel in mind and also give the best quality of service to the guest, we concentrate energy savings, food cost savings, water recycling, investing in a more efficient HVACs system, etc. Hotels often spend more than 50 per cent of their operational budget on airconditioning and heating, the best way to cut those costs is to invest in a highly efficient HVAC system that uses less energy and fewer kilowatts to cool and heat a room. In the long run , such practices save a lot of money in higher electric bills.”

However, Iyer opines, “Customers always expect good quality in products and services. Tight budgets do not restrain us in maintaining quality. There are various products which help to meet the price budgets without comprise in quality. The challenge is to find more economical ways to get better or same quality in the given budget. It provides opportunities to buyers to be more agile and flexible to find better sources who can give same or better quality at the same or lesser rates. Methods like reverse auction, e-bidding, conventional tendering and negotiations help to get better value for the money spent.”

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Mahendra Shinde

With the advancement of technology and introduction of new products, the way of conducting a purchase operation has transformed. Mahendra Shinde, currently a purchase manager with Kapco Catering & Grand Cuisines, who has a worked with hotels like The Resort, Mumbai and ITC Hotels among other organisations shares his thoughts. He says, “While the concept of purchase remains the same, technology has only assisted a manager’s operations adding to its efficiency. For example, it has become relatively easy to fill in e-tenders or find new vendors online. The new interactive websites have added the convenience of making digital payments and also check the credibility of a new vendor. We can now see 3D demonstrations of international products before making an order.”

Vendor relations

One needs good insights on the process of purchasing, contracting, planning, receiving, scheduling and managing purchasing procedures. Besides all this, the managers also need to be well versed with techniques to source products, research new brand offerings and evaluate vendor performance. Shrivastava shares, “Vendor relationship plays a very important role to provide the best term and the best prices for the hotel. All hotels deal with credit terms, it mostly helps in payment terms with best quality products with the best price. Purchase managers’ performances depends upon the vendors. That’s why supplier relationship management is the most important.”

Furthermore, Thantri adds, “Supplier selection is the process by which firms identify, evaluate, and contract with suppliers. The supplier selection process deploys a significant amount of a firm’s financial resources. In return, firms expect significant benefits from contracting with suppliers offering high value. This article describes the typical steps of supplier selection processes: identifying suppliers, soliciting information from suppliers, setting contract terms, negotiating with suppliers, and evaluating suppliers. It highlights why each step is important, how the steps are interrelated.”


Quotes

“As more number of suppliers enter the market, we need to be more careful with our purchase decisions”
Mohan Deshpande, chairman and founder, Hospitality Purchasing Manager’s Forum (HPMF)

“Now we are connected to the vendors through the click of a button thanks to new technology”
Nitin Nagrale, vice president materials, Foodlink Restaurants India Private Limited

“Energy efficient resources go hand in hand with customer satisfaction”
Ramesh Iyer, assistant vice president, material management, Deltin Group, Goa

“ In today’s highly competitive market place , it’s imperative for business to innovate new ways to streamline the supply chain and optimize productivity”
Swinky Shrivastava, purchase and stores manager, The Acacia Hotel & Spa, Goa

“Single source (or sole source) is considered to be risky from a traditional point of view, so buyers are usually advised to avoid it”
Vijayanand Thantri, head procurement, Intellistay Hotels Private Limited

“You have to ensure that the brands and quality of the products you select within your procurement process all deliver on your promise”
Ganpat Dalvi, director of purchasing, Four Seasons Hotel, Mumbai

“Dealing with multiple vendors creates the much needed healthy competition”
Mahendra Shinde, purchase manager, Kapco Catering & Grand Cuisines


The purchase managers deal with multiple vendors on a regular basis and end up developing a healthy professional relationship which leads to mutual benefits. Shinde, opines, “More than the suppliers, the vendors become our partners. They understand what is the requirement of the industry, a particular property and modify the product accordingly. The vendors add to our knowledge of new products in the industry and also help accommodate these products in hotel operations.”

In addition, Nagrale mentions, “When managers are stuck with last minute requirements. These vendor relationships help a great deal. Be it old vendors or new relationships, the managers can assist them and also grow through their feedback.”

Commenting on the importance of this relationship, Deshpande shares, “As more number of suppliers enter the market, we need to be more careful with our purchase decisions. We need to support them and vice-versa in order to grow together.”

Single source procurement vs multiple vendors

Hospitality is a complex market with multiple vendors to choose from, so while some hotels restrict to single source procurement many opt for multiple suppliers. The factors that weigh in on the decision vary from hotel to hotel. Iyer states, “A single procurement is not a good idea. It is best to have multiple vendors in today’s time. Multiple vendors lead to better quality of goods and services due to increased competition. It leads to reduced prices and innovation to give better value to customers.”

Adding his thoughts to the subject, Dalvi mentions, “To have consistent products quality and service, we mostly work with minimum two suppliers and ensure compliance to usage of all approved contract and for better negotiation.” Shrivastava on the other hand feels, “There are factors to consider like best of breed, complexity involved, cost of the single vendor, implementation challenge and the procurement effort. Once we have carefully analysed these we decide which vendor to pick as per the requirement of the hotel.”

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Not forgeting the risks of single source procurement, Thantri, mentions, “Single source (or sole source) is considered to be risky from a traditional point of view, so buyers are usually advised to avoid it. According to the traditional view; quality, cost degradation and supply chain risk are the three main areas under which single source risks are classified.”

“In my experience I have seen that when it comes to smaller hotels, single source procurement benefits the hotels due to less documentation but in case of big chain of hotels, multiple vendors help get the best price,” Nagrale adds.

Shinde concludes, “Every vendor has a different sourcing style, knowledge and procedure. When we deal with multiple vendors, it not only creates a healthy competitive environment but helps us get the best suitable price for our hotel. So when it comes to bulk requirements multiple vendors suits best but in case of less time and small orders, single sources would be better.”

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