Among other elements, BITAC® Purchasing & Design West featured an educational session which addressed some of the key issues related to buying hospitality product, such as the importance of having scale; the impact of technology; and mitigating risks.
Entitled “Purchasing Perspective: How To Create Added Value,” the panel featured representation from a brand as well as the ownership ranks and a third-party purchasing firm. Participants were Steve Bleecker, senior manager, strategic sourcing & procurement, Disney; Ting Lu, director of procurement, Hawkeye Hotels; and Michael Orloff, principal, EVP, Stroud Group.
The panelists emphasized the inherent value of buying on behalf of many properties. According to Bleecker, “Scale is very important. What we try to do behind the scenes is leverage the overall spend so we’re looking at consistency where we can. It may be OS&E products; it may be case goods when we do rehabs. We look to partner with manufacturers so that even though our footprint maybe different in each project we do we can work with them and leverage the overall spend on each project.”
Orloff added, “We don’t have the luxury of thousands of hotel rooms, but we leverage our volume in lots of different ways across many new clients and across the portfolios that we work on. We look at volume and obviously leverage is a very important part of the equation. But also we look at it as having the agility, being flexible and being able to source things differently as well as using the marketplace and the dynamics of a world economy to our advantage and to our clients’ advantage.”
Figuring out how to mitigate risks when it comes to securing product is a key consideration for many purchasing executives.
“It’s seeing for yourself how these things really do get produced. A lot of people they buy it and there’s a sense of hope that it just shows up and is in good shape. Sometimes it doesn’t happen. As a buyer, there are certain things that are out of your control, but you can at least do your homework and you can deal with good people and good companies that when there is problem there is a sense of urgency and the ability to fix a problem,” insisted Orloff.
“The qualification process of getting suppliers in place that includes financial reviews, if it’s an overseas supplier you have to do the ILS (international labor standards) and make sure the factory is compliant with ethical standards. We also look at sustainability so there are a number of factors in approving or prequalifying a supplier and participating in our RFPs. But then there’s also the aftermarket, so one of the things we look at very carefully is not just the product cost or first cost but total cost,” noted Bleecker.
Lu stressed the importance of a trusted partner. “We want to work with someone we trust. I’ll tell them, ‘I’m the one signing all the approvals, but you are the expert so I count on you to do all the detail work and specs so I don’t need to worry about that part,’” she said.
Orloff agreed. “I think it’s important on the procurement side, you can’t be an expert on everything. You have to ask the right questions, and I think it’s up to a buyer to really understand what you’re buying and how it works within the environment and care enough about that.”
As technology continues to emerge, the impact is evident in nearly every aspect of hospitality and procurement is no exception.
“A great amount of our market research now is initiated online. We have members of our staff that are actually in the virtual marketplace looking at new products and technology,” said Bleecker, who added that the company also uses technology to some of its procurement and takes advantage of add-on tools.
Lu further touted some of the benefits of technology. “When you calculate all the carpets, tiles or wall vinyls it will take you weeks and it’s still not accurate enough, but with the software now you just need to move the mouse and all the numbers are accurate. There’s no risk, so it’s just amazing,” she noted.
However, Bleecker was also quick to point out that technology is not enough on its own. “Ultimately, though you still have to have the hands-on approach of visiting factories, seeing the product and getting prototypes to approve the final product before you ask the manufacturer to produce 10,000 pieces of case goods,” he commented.
Orloff underscored the point. “You can go to the Internet and find out about somebody and something, but sometimes it’s not enough. You need to really meet them and to understand who the people are behind the company and to understand the product that you are buying and its capabilities. So for me it’s a tool, but it’s something I would not rely on.”
Meanwhile, Bleecker listed his top concerns going forward as “globalization and competition.” He further added he wants to ensure that “we’re touching all the bases, making sure that the products and suppliers are qualified and the products really perform as expected.”
Orloff offered his perspective. “As a business owner I’m always concerned about pipeline. You never know from year to year who’s going to be busy. We have clients who use us constantly and we can count on business from them but then we never know. Because of that uncertainty we have to be able to staff our company to be right sized. The danger is that you get too busy and you’re not able to take the work that you have and that’s a problem. It’s always a challenge for us as an independent procurement company, but we have good strong relationships with our owners so we can plan with them,” he said.