The Power of Purchase panel discussion highlighted how the purchase department of a hotel has evolved into a value centre which can contribute to the bottom line through smart savings By Sudipta Dev
At the 12th Power of Purchase panel discussion of Hospitality Purchasing Managers’ Forum (HPMF) at FHW Bengaluru 2016, leading purchase managers from hotels deliberated on ‘New procurement trends in hospitality purchases’. The panel members included Jijoy M Joshua, VP projects, Mysore Lights; Sekar S, manager – purchase, Adarsh Group; Natarajan Subramanyam, materials manager, Crown Plaza Bengaluru Electronics City; Nanda Kumar, CEO, Vendor Globe Procurement Services; Somnath Auddy, materials manager, Vivanta by Taj, MG Road. The panel discussion was moderated by K Chandrasekar, chief executive, Atlas Distributors.
The role of the purchase department has changed significantly in the last decade, according to Joshua, what was earlier thought to be just a purchase centre is now a solution provider. There is however still a mental block in making procurement a transparent process. “The trend that we see is e-procurement, which is a result of technology advancement. E-procurement will become more popular in times to come,” remarked Sekar, requesting the IT departments of hotels to encourage e-procurement. Nanda Kumar however felt that digitisation will take some time, while many vendors are educated on the digital platform, some are still in the process. “Vendors are scared about disclosing the rates as their competitor will know about it,” added Kumar. He informed that Vendorglobe is a digital catalogue for buyers and sellers. “For buyers it is a search engine. We also automate the whole negotiation system,” remarked Kumar.
Subramanyam was optimistic that change will come with time. He said, “10 years ago project managers were not sharing information with each other. Now with the emergence of HPMF, within a few seconds the queries get answered across India. We will see the same trend happen with chefs and housekeepers also in the near future.” Auddy averred that information sharing should be there in all functions across hotels. “Our ultimate aim is guest satisfaction,” he asserted. Auddy pointed out that while guest satisfaction continues to be a key area, the responsibilities of a purchase department also includes the bottom line. “The job role of a purchase manager has become so significant that other industries are also looking at taking procurement managers from the hospitality industry,” said Chandrasekar.
An interesting trend that has happened is indigenous suppliers coming to the forefront with alternate products, due to government rules and regulations which hotels have to deal with. A successful relationship with suppliers is critical to the success of the purchase department. Sometimes the purchase manager has to groom certain suppliers. Acknowledging that healthy relationships with suppliers is essential, Sekar mentioned, “Without them the purchase department cannot achieve anything. We also need to invest in the relationship.”
The purchase managers also debated on the concept of ‘just-in-time’ procurement, with Auddy pointing out that it depends on infrastructure to maintain the bare minimum inventory.
Innovative concepts
Among the challenges for a purchase manager, is bringing in innovative concepts. “Sometimes for simple things you want to implement, traditional methods take over innovation. It is a collective responsibility. All the departments need to work with the purchase department to incorporate innovations and save cost,” said Joshua. Particularly, if the product is new, it is not necessary that the department which needs it will agree with the purchase manager, even though the alternative is better. “Innovation is all about data being shared and data being disseminated. There is a lot of information available due to HPMF platform, a lot of innovative concepts are being shared,” he added.
Of course, the purchase manager also has to ensure that the end product for the user department adds real value.
A value centre
There is also the question of whether the procurement department is considered as a value centre or a cost centre. “It is a value centre – we add value to the bottom line and customer satisfaction,” asserted Sekar.
Joshua reminded that the purchase department is not just an expense department. He stated, “We do a lot of savings which cannot be seen. Our revenue generation should be calculated on the basis of how much we have saved since the previous year.” Auddy agreed that the savings add to the bottom line of the hotel.
The core competency of a procurement manager is product knowledge – to know the specification of each product and do rate analysis. “We should do analysis and come to conclusion that we are doing some value addition. Analysis does a lot of value addition to purchase department,” said Sekar.
