‘Hospitality procurement to become less of a service and more of a function’

Nitin Shankar Nagrale, Founder & General Secretary, HPMF, believes hospitality procurement professionals will play a more significant role in the organisation’s overall performance and value

One the most crucial divisions in the hotel sector is the Purchase Department. Not only does it identifies the business requirements for goods and services but finds reliable suppliers to meet requirements at the best prices to ensure quality for the company. For a long time, it was considered a support system for the hotel to run smoothly and never got its due recognition.

To curb this issue and support the hospitality procurement management, Hospitality Purchasing Managers’ Forum (HPMF) was established in November 2010 with 120 members. The founders realised that there was no institute or association which could give information and knowledge to procurement professionals. Thus, HPMF was born out this dire need to bring together procurement managers to share knowledge and also create a platform to develop professionalism, confidence and respect. Today, the forum, with over 4,600 members, has presence in 40 Indian cities, and chapters in the Middle East, Sri Lanka and Nepal.

Nagrale says that the US$10 billion hospitality procurement industry is poised to grow rapidly in the years to come with new Standard Operating Procedures (SOPs) adopted by the procurement managers to stay alive in the business. Excerpts:

Procurement is the backbone of the hospitality ecosystem which services and controls all the aspects of a running hotel, be it new or existing. Elaborate.

Procurement function mostly focusses on market engagement; it being tendering, negotiating and contracting. However, a large amount of value has been added, both upstream and downstream of the purchase decision. Now the procurement functions spend more time in upfront planning including strategy and spending and category analysis. Furthermore, greater focus is placed on procurement post-contract award including contract and supply partner relationship management to ensure expected benefits are realised.

Nowadays, strategic procurement is considered a critical part of the hospitality industry for any company which intends to remain competitive in the business. A well-developed procurement process directly translates into an improved business performance by way of focussing on bottom-line savings in the long-term. To do so, hotels need to manage and source their supply base in an efficient manner while streamlining the process as a whole to retain strategic viability.

Advancements like web-based purchasing and software systems have moved from being advisable to required status. Spend analysis has become integral to operations and purchasing accountability too is more important now! That’s the power of purchase.

How do you manage to personally interact with all your members?

HPMF members are present in 48 countries but there are no official chapters. We interact with each other through social media and meet during conferences, events, exhibitions and trade fairs or during supply partner site visits and demonstrations which we organise. I try to ensure to attend them all to to meet my colleagues.

How can procurement managers create a stronger backbone for the hospitality businesses?

Covid19 gave us a distinct perspective of our own lives. We started thinking out-of-the-box and understood that the basic necessities of individuals are more than sufficient to survive. Procurement has evolved a lot lately which resulted in calling for different strategies and organisational structures in generating the most value for the business. Procurement performance, intelligence and collaboration became the key drivers to ensure that today’s procurement department is able to work hand-in-hand with other department heads to deliver stakeholders value. Although there continues to be an intense pressure on procurement department to control costs and drive operational and process efficiencies, the issues of sustainability and Corporate Social Responsibility continue to grow in importance. And the focus is not only on internal policies but on ensuring that the supply partners are instituting their own aligned policies for sustainability and social responsibility.

Increasingly, hotels are looking across their global supply chains to foster excellence in these initiatives through sharing information and best practices in an effort to ensure the highest standards. The structure of modern procurement department is also changing dramatically. There is a rapid movement towards the centrally led organisations where a centralised procurement strategy enables tighter control and standardisation of decentralised transactions but allows local purchasing execution. These centralised structures provide procurement department with greater negotiating power and drive bottom-line savings for the entire organisation. Along with centralisation, there is an increased integration between procurement and the rest of the organisation.

As procurement paves the way to control expenditures, drive standardisation and process efficiencies, we see greater collaborations occurring, especially with finance. In addition, collaboration with supply partners is becoming increasingly important as organisations look to optimise supply chain performance. Procurement is also achieving a new prominence within the organisation and is regarded as more strategic to the business than ever before. Gone are the days when the procurement department was viewed as a transaction processor. Modern procurement department is now viewed as the key to enable the organisation as a whole in achieving its strategic objectives of cost-cutting, meeting corporate social commitments, and ensure that the strategies are sustainable and can pave the way to the future.

The following methods must become the part of the strategic procurement post the Covid -19 era

  • Relationships with the key supply partner need to be enhanced and built upon.
  • Determining and identifying exactly which aspects result in maximum bottom-line savings.
  • Putting a stop to maverick buying, and enforcing centralised hospitality procurement where necessary.
  • Contract compliance should be streamlined, and errors should be eliminated to facilitate transactions between supply partners and buyers.
  • Not only the top-level management, but junior executives should be equipped to deal with hospitality procurement challenges if the need arises for an initiative-taking approach.
  • Supply base should always remain optimally pruned, eliminating redundancies and un-rationalised choices.
  • Technology tools like web-based purchasing systems should be incorporated and transition should be complete among the workforces.
  • The shift from manual to automation must be focused upon throughout the organisation’s procurement and sourcing processes, leading to significant bottom-line savings eventually.
  • Supply Partner management programs should be raised to critically important status, and should remain at the core if relationships are to be maintained and further enhanced.

What is the ideal way for the procurement managers to invest with right supply partners to benefit the property?

Supply partners nowadays are considered partners and not mere supply partners of products and services. There is no existence of purchase professionals if there are no supply partners in the supply chain cycle. Supply partner credibility and reliability is a result of consistent efforts and not established overnight. It is an outcome of equal treatment, respect, accountability, loyalty, focussed approach, mutual trust, competence and consistent action.

Managing risks has become an essential element of any business. The purchase manager, due to his job role, becomes an important person who evaluates and then becomes party to managing risks. There must be a considerable amount of research which he needs to do before signing on the dotted line. There are risks involved in selecting products, shortlisting supply partners, freight forwarders, lead time, custom-clearing agents, insurance and several other external factors. Purchase managers must talk to seniors, use expert opinion and where appropriate, seek legal advice to assist in managing the risks.

The ever-increasing final product cost due to increased costs of raw material has resulted in reduced buying power. At the same time, several companies have adopted the policy of cutting budgets. Now the problem becomes even bigger but as usual there is a solution for everything. An intelligent buyer gets his budget approved from the management, keeps an eye on inflation and the other one on projected increase in costs. He also ensures forward buying and JIT, manages bulk buying, creates loyal supply partnerships to assist in mitigating costs, ensures accurate yield management procedures are followed and keeps the management updated about the market volatility.

Share details about the next convention of HPMF.

HPMF is known for organising larger-than-life events at prominent destinations. We missed the chance in 2020 and even in 2021 due to the pandemic. But there are major plans for a comeback with a big bang. The working committee has started working on several strategic plans to conduct the next year’s convention.

This article was published in BW hotelier issue dated '' with cover story titled 'INVESTMENT SPECIAL ISSUE VOL 7, ISSUE 6'

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