While the pandemic unraveled traditional hospitality processes and practices, there was one department that stood strong and ensured that business continued as usual. These heroes, belonging to the procurement department, ensured that their hotels could over
come supply chain challenges, man power shortages and rising prices. What’s more, they also managed to champion the cause of sustainability, which helped enhance resource efficiency along with cost savings, while also attracting the rising tribe of eco-conscious travelers.
To understand the road ahead, Hotelier India organized the ‘Pillars of Procurement’ webinar on 11th March, 2022. The virtual event was curated by Nitin Nagrale, Founder of Hospitality Purchasing Managers Forum and he was joined by his peers Basil Massey, Corporate
GM – Purchase at The Leela Place, Hotels and Resorts, Bharanidharan Ramaswamy, Director of Procurement, APEC at Marriott International, Hariharan NV, Associate VP-Materials at Indian Hotels Company Limited (IHCL) and Sudhir Gupta, Head – Procurement at ITC Hotels. During this session, the panelists addressed pertinent topics, including digital transformation in procurement, supply chain challenges, sustainability and working with local vendors.
We started taking payment status from vendors since we negotiated with
them and they look up to us to support them in their payment terms.”
— Basil Massey, Corporate GM – Purchase, The Leela Palaces, Hotels & Resorts
THE ABC OF PROCUREMENT
Nagrale flagged the session by quizzing Ramaswamy about the changes Marriott implemented to keep pace with market dynamics. The latter stated that the hospitality company focused on the ABC principle, which encompasses advance planning,
benchmarking and collaboration. While advance planning was challenging during the pandemic when things kept shifting constantly, adhering to this principle can help save substantial money, time and effort.
Meeting a supplier and negotiating with them is only 10% of the procurement business,” Ramaswamy pointed out. “We need to do our homework on what, when and how much has to be purchased, which is part of advanced planning.”
While inflation drives up prices constantly, it also puts a cost pressure on hotels, especially when revenues might be low. Hence, benchmarking of products and identifying different options and sources can help alleviate this challenge. Ramaswamy suggested that benchmarking could include various factors, including past purchase prices or market
indicators for different brands. In addition to benchmarking and standardization, Marriott also used the downtime clean its internal database with vendor credentials to that the procurement team is ready to hit the ground running when business recovers.
Collaboration, according to him, is critical and it requires staying in touch with suppliers constantly. Moreover, it is important to not overlook the human element of this business and refrain from treating vendors merely as sources for products and services.
“Meeting a supplier and negotiating with them is only 10% of the procurement
business.”
— Bharanidharan Ramaswamy, Director of Procurement APEC, Marriott International
MORE TO OFFER
Massey shared that The Leela Place, Hotels and Resorts started organizing town halls for vendors. “We give them a brief about our current operations and future plans,” he added. “After all, they too underwent tough times. We started taking payment status from them because ultimately we negotiated with them and they look up to us to support them in their payment terms.”
Nagrale approved this move sing most hotels were cash strapped themselves. He stated, “The purchasing manager must get involved in the payment cycle and prioritize payouts to help the supply partner to some extent.”
Massey added that the hotel chain also undertook consolidation efforts, so that suppliers also get significant business, which in term encourages to give good price quotes. “Moreover, this consolidation and offering several product requirements on a platter will inspire them get more vendors on the platform,” he pointed out.
Hariharan noted that the relationship between a vendor and a hotel are two sides of the same coin – if either fail then the coin has not value. “If we are strongest brand in the industry today, then it is partially because of our vendor partners,” he emphasized. “These partners helped us tremendously during the pandemic situation. They went out of their way to offer us the best commercial terms, be it in terms of discount or product options. Hence, they are a very valuable chain in the ecosystem.”
BEST OF BOTH WORLDS
When Nagrale asked the panelists on ow their procurement strategy resulted in driving competitive advantage for your business, Gupta stepped up to the plate. He stated that even when hotel operations came to a standstill, vendors emerged as the lifeline. “These partners helped, and supported, the business to run during difficult times and propelled transparency in supply chains,” he claimed. “In the wake of these disruptions, a lot of flexibility was required to keep operations running and a lot of focus shifted to risk management.”
He added that procurement professionals spent a better part of their day looking at trends based on historical data, coordinating with suppliers to get products on time, and this opened their minds to identifying risks. “We all paid attention to issues like capacity constraints since many vendors are also dependent on subcontractors. This realization made us rethink existing strategies and future-proofing it for any unexpected disruptions,” he mentioned.
Moreover, this enhanced visibility into procurement practices has helped augment the relationship between procurement heads and suppliers. The former also realized the merits of localized and reasonable sourcing.
Gupta noted that under normal conditions, procurement professionals would not look into these alternatives, but they were compelled to explore it during the pandemic. “For instance, whether it is groceries or amenities, the perception is that big chains always
have so many international and regionals contracts, which they can leverage for volume purchase. But we were forced to have some kind of relationship with local vendors if we wanted to survive during the pandemic,” Gupta noted.
Ramaswamy added that vendor development also includes listening to suppliers and understanding their pain areas. “During tough times, some vendors might want to reduce, or even exit, the business.
In the wake of these disruptions, a lot of flexibility was required to keep
operations running and a lot of focus shifted to risk management.”
— Sudhir Gupta, Head – Procurement, ITC Hotels
DEVELOPMENT PRACTICES
Often, suppliers also need assistance in terms of what products to introduce, how to do it or sell them to hoteliers. Nagrale stated that these development practices can have a bearing on a hotel’s performance and invited panelists to elaborate about this.
Massey recalled how earlier, consultants for linen and upholstery would showcase swatches and ask procurement professionals to import them from Singapore or another global city. This was the industry practice till the pandemic struck.
“Today, we work with local vendors and not only save money and get a good price for the material, but we also benefit from faster delivery time. We could also monitor that production personally. This has become a landmark shift across most product verticals,” he reiterated.
So, while earlier many hotels would procure furniture from China for their properties, today local vendors are able to match the design, price, delivery and even offer better quality.
Interestingly, vendor partner development is not merely about replacing a product or creating it locally; it also encompasses hand holding the supplier to bring them up to the level of expectations
for the organization. “The partner first needs to understand what the hotel company wants and then they need to be educated on how to reach there,” Nagrale explained. “This could include overhauling their existing production practices or enhancing their technical knowhow.”
Adopting the role of a mentor helps to break the tendency to work with singular vendors. Procurement professionals can instead create a larger network of suppliers, which also gives them the power to negotiate better and get faster delivery.
Hariharan added that in addition to developing a setup of local suppliers, IHCL has also helped these vendors to export their products, be it fabrics or furniture. “For one of our international projects, we imported from India, which gives the Make in India initiative a massive fillip.”
All panelists agreed that the ongoing Ukraine war, escalating fuel costs and rising freight charges have also increased import duties. At times like these, the only way to control costs and have continual supply of products is by aligning with local vendors.
The pandemic might have thrown several curveballs at hoteliers. However, it also shed light on newer practices that could be adopted to make them efficient and agile. Check out Hotelier India’s YouTube channel to list to the panelists of ‘Pillars of Procurement’ and see how these professionals pivoted the challenges by adopting innovative strategies.
