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< Back to news 20 June, 2011

The future of E-Procurement

Purchasing and procurement have become increasingly important to the hospitality sector in recent years, with operators and suppliers working together to find new solutions. One of these solutions may be in the very way business transactions take place. Enter: e-procurement systems. At the Purchasing Forum yesterday, the conversation took the form of a case study of a company which has made the transition to e-procurement. The case study was presented in three parts by:

Purchasing and procurement have become increasingly important to the hospitality sector in recent years, with operators and suppliers working together to find new solutions. One of these solutions may be in the very way business transactions take place. Enter: e-procurement systems.


At the Purchasing Forum yesterday, the conversation took the form of a case study of a company which has made the transition to e-procurement. The case study was presented in three parts by:


• The Client: Roy Bing, Magdalen College, Oxford
• The Systems Provider: Andy Badger, EPSYS Ltd
• The Supplier: Colin Harris, Fresh Direct


By the end of the event there was no one in the room who didn’t agree with the sentiment that e-procurement was an inevitability. Given changes in consumer purchasing behaviour, there is ample evidence to support this argument, along with the availability and capacity of technology (including mobile technology). Whilst there has been slower take up amongst smaller and independent operators, the transition could ended up being within a very short window, especially given the efficiency benefits. But are operators prepared for such a fundamental shift in their way of doing business? And even if they are, how can they choose the right system for their business out of the myriad of options available?


“E-procurement is many things to many people, but in essence it is a means by which companies can exchange data and do business online”


The emotional purchase


Comparatively speaking, the retail industry has adapted to online procurement significantly faster than hospitality. This is true both in the commercial sense and business-to-business.


Historically there has always been a feeling in the hospitality industry that we’re different somehow. The rules that apply to other industries can’t be levied against hotels or restaurants or contract caterers because they’re just so the requirements are more complex. But how true is that sentiment, really?


There is no denying that a natural link exists between a chef’s creative exploits and what the supplier has available on any given day or week. Many chefs will create menus based on a special offer, or what the supplier has fresh, available in abundance or locally sourced. In addition, suppliers range in size from ‘one-man-bands’ to specialist operators, with many relationships being built up over years. There is a fear in the industry that this emotional element to the purchasing process may be lost through the use of e-systems. This is not true according to all three of the speakers.


“The purpose of these systems is to reduce cost and to “free up” staff to spend more of their time completing their daily tasks rather than the cumbersome job of manually placing orders with a myriad of suppliers ... Used correctly e-procurement can actually reduce time spent on purchasing decisions, whilst saving money for the business”
The number of e-procurement systems available specifically for the hospitality industry are increasing with some clear benefits to business for those making the change to on-line systems.


E-Procurement and relationship building


It’s a truth universally recognised that anything “new” will always raise some element of aversion before being accepted. And that’s the same for e-procurement systems.
“The head chef was the loudest and most prolific opponent to the use of e-procurement systems – now, he’s its biggest advocate and wouldn’t be without it”
E-procurement systems don’t remove the relationships between supplier and customer – used correctly they can in fact enhance them. The capability of the systems to store information about delivery times; frequency of products being out of stock, special offers, damaged goods etc means the client can accurately track a supplier’s history. According to Andy Badger of Epsys Systems, this means that rather than using a “one off” example of poor service, the client can give exact examples of the suppliers history – a very useful tool in times of negotiation and price agreements!


Efficiency gains


Another very valid point made in the course of the session related to the potential for e-procurement to deliver better efficiency and cost savings in the business. This particularly relates to stock control, labour costs and to reduce the implications of purchasing fraud.


“E-procurement systems significantly reduce the occurrence of employee theft or kick-backs from suppliers”


Using e-procurement systems enable a business to accurately track its stock levels in real time. Rather than manually checking and re-checking the amount of flour in the stores and fillet steak in the fridge a chef or stores manager need only look at the system online to pinpoint the levels on site. This means that those items used most frequently can be traced and re-ordered as and when required, rather than in bulk and then stored, thus freeing up more space in the building. In fact, one delegate pointed at the use of tablet hardware by staff in their stock room, meant that information was updated readily and accurately by the team, which made a significant difference to ordering patterns.


Employee time and energy is also better spent as chefs can be freed up to do what they do best – creating menus and designing recipes. Rather than haggling on the phone with a supplier a chef can simply access the system as and when required, in full confidence that the orders placed today will be delivered at the time and date required.


The fringe benefits


A company’s Corporate Social Responsibility Policy can be enhanced by the use of e-procurement systems. Besides the obvious reduction in the amount of paper generated, the capacity to store information on the system can also be useful to the business’s CSR planning.


Information pertaining to sourcing of goods; awarding of kite marks such as Red Tractor or Fair Trade accreditation; nutritional information; calorie counting for new recipes; allergen knowledge; fat content etc can all be stored on the systems – creating more confidence in the products being offered to clients.


In conclusion


In the end, the future of e-procurement systems seems to be that they will become a fundamental part of hospitality business. There are choices available for the industry, the question is understanding which one is best for a business. The answer to that is, every one is different – it’s up to each company to source the right system for their business. Yet, the time to act is now.