E-procurement in hospitality growing in importance

Hoteliers need to pay more attention to their procurement and purchasing functions, and force their suppliers to provide e-catalogues

Steven Speter speaking at the Hotelier Middle East Procurement Summit 2015.
Steven Speter speaking at the Hotelier Middle East Procurement Summit 2015.

Steven Speter, managing director, 36 Strategies has urged hoteliers to turn their attention to implementing e-procurement practices.

He said that 50-60% of a hotel’s operating cost flows through procurement, and that “its an enormous part of the business; procurement is the backbone of the entire organisation,”

Speaking at the Hotelier Middle East Procurement Summit, Speter urged hoteliers to devote attention towards hotel procurement, and focus on e-procurement. “Firms and hotels follow e-procurement to be more efficient, as the sheer amount of finance that flows through procurement is enormous. It is not only about the goods and services you procure, but the amount a hotel invests in the process itself.Which means, if you can execute your tasks better, expenses will be drastically reduced.”

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Speter also pointed out the amount of cash that firms, ranging from UAE SMEs to large hotel chains, spend on raising an LPO. “The industry benchmark is US $75 per LPO, and UAE SMEs produce 65 LPOs a day. This results in a staggering US $4875 per day in raising LPOs. We arrive at this figure based on several parameters that include human capital investment, power and energy consumption etc.”

“Processes cost money, and that’s why e-commerce is the way forward. But, there are two other avenues that you need to be considered, catalogue management and naming convention. Without a proper catalogue, suppliers will hamper their own progress,” he added.

Speter also advised to be careful of what suppliers do in order to reduce costs. “You have to be watchful of how suppliers offer you a better price. The most common practice is with a paper napkin, suppliers often return with a lowered cost, after being rejected initially. Mostly they manage to reduce costs by lowering the GSM (thickness) of the napkin, making it appear cheap and substandard. This is, hence, another example of the importance of a well-defined catalogue."

“I’m a supporter of e-commerce and am staunchly against ERP systems,” he said.

The full report from the Hotelier Middle East Procurement Summit will be published in the December 2015 issue of Hotelier Middle East.

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