Howard Ball, Head of Purchasing at Beacon, comments on the importance of implementing a purchasing strategy as one of the secrets to a hotel restaurant’s success in this week's edition of Hotel Business Magazine.
“All hotels, regardless of size, need to have a widescreen view and a deep understanding of how their procurement is managed and its effectiveness. Yet it is a source of constant surprise to find how few hospitality businesses have developed a formal procurement strategy and the extent to which emotional and “maverick” spending are frequently identified within both small and large organisations. Clearly, a key objective of any purchasing strategy must be to drive the best price. Supplier rationalisation can help to achieve this and should be a consideration in any purchasing review, but simply consolidating supply to leverage better prices ignores other critical elements, which are the foundations of improving profitability.
So what are the key elements of a successful purchasing strategy? First, there needs to be real ownership and commitment at a senior level and very importantly, the authority to drive compliance throughout the business to centrally agreed deals and trading terms. So the process needs to begin with the board.
Second, strategy needs to embrace a clear understanding of the factors that impact on the achievement of profit over and above product price and ensure that effective, robust control measures are in place with performance effectively monitored.
From a practical perspective, begin by understanding what the business is buying. Purchasing is all about knowledge and management information, so start with an analysis of the purchase ledger to identify the highest spend categories.
80 percent of spend will generally be with the top 20 percent of suppliers or, put the other way round, only 20 percent of what is spent comes from 80 percent of the suppliers. (That’s a lot of small purchases from a lot of suppliers and brings with it a cost.) From this analysis, category purchase priorities can be established and an initial plan can be developed.
Drilling down to product prices and volumes purchased can be challenging where this information is not readily available, particularly with complex purchases. However, this understanding is critical to enter into meaningful supply discussions and contract negotiation, which in essence, is a key consideration when it comes to running a successful restaurant as a hotelier.”