By Johannes Vocke
Sourcing goods and services effectively is at the epicenter of day-to-day functions in hospitality firms and accommodations. The careful and systematic procedure of procurement not only ensures smooth operations but also reflects our commitment to delivering exceptional hospitality.
Unsurprisingly, most hospitality businesses grapple with a shared challenge – harmonising the procurement of essential items and services against their budget restrictions. A survey by Deloitte has drawn attention to this tug-of-war between cost-efficiency and necessity, indicating that over 66% of hospitality organisations consider cost savings as their ultimate goal, a significant rise from 40% presented in previous years.
However, in this world of rapidly rising costs, the deployment of digital procure-to-pay (also known as P2P and e-procurement) solutions becomes crucial. Leveraging this technology can facilitate the automation of purchasing processes, significantly reducing time inefficiencies and manual errors. Indeed, in the hospitality industry, technology can make the difference between precarious margins and profitable operations.
Consider these numbers:
- Hotels using e-procurement have seen a 55% increase in compliance with negotiated contracts. (Hospitality Tech)
- Hotels that use e-procurement solutions have seen a 30% reduction in maverick spending. (Faster Capital)
- Approximately 75% of businesses report improved risk management with e-procurement. (PWC)
- E-procurement can lead to a 10% reduction in inventory costs. (Research Gate)
- About 70% of businesses report improved supplier performance after implementing e-procurement solutions. (RFP 360)
- E-procurement can reduce transaction costs by up to 60%. (Aberdeen)
Now that we know the role of e-procurement solutions let’s talk about how they can benefit your hotel enterprise.
Time is Money
Now, you might be wondering, “How exactly does this P2P technology generate smarter savings?” Well, the concept lies in harnessing its functionalities like automation, compliance, contract management, real-time expenditure tracking, supplier benchmarking, and price comparison. More than just implementing these features, it involves capitalising on their synergy to manifest savings in forms that can be effectively measured.
Time is money in the hospitality industry, and the more of it you save, the more of the latter you’ll have. E-procurement solutions automate many of the manual tasks associated with procurement, from purchase requisitions to invoice approvals. Not only does automation save time, but it also reduces the risk of human errors that can result in costly mistakes. In turn, your staff can spend fewer hours on administrative tasks and more hours on providing excellent service to your guests.
Another critical function of e-procurement is facilitating effective spend analysis. With traditional manual processes, not only is data tracking a laborious task, but it’s also fraught with potential errors, especially as the volume of procurement activities multiplies. With P2P solutions, your purchase data is automatically collected and stored systematically, ready for an accurate and comprehensive analysis. This process serves as a foundation for strategic decisions on cost savings and optimisation efforts.
Smart procurement and strategic spending set the stage for efficient allocation of resources and optimising financial impact. Forward-thinking procurement officers, in collaboration with their financial and budgeting counterparts, are tasked with identifying strategies to measure and enhance procurement cost savings by exploring:
- Identifying and zeroing in on saving opportunities:
- By thoroughly examining areas of habitual high spending, hospitality organisations can determine potential resource optimisation and efficiency gains.
- Proactive cost savings and mitigation strategies:
- “Cost savings” agendas aim to trim down the expenses of necessary items and services, while the “cost avoidance” initiatives target eliminating unwarranted expenses completely.
- Overstocking leads to higher costs and potential wastage while understocking can result in missed sales opportunities and dissatisfied guests. With real-time tracking and analysis, you can keep your inventory at its optimal level at all times.
- Contract surveillance:
- Unnoticed variances between invoices and agreed contracts can lead to monetary losses. Even the slightest deviations need tracking as they may accumulate into substantial savings over time.
- Understanding the concept of total expenditure:
- Cost-saving constantly needs a holistic view, including considerations beyond just purchase prices. Auxiliary elements like delivery fees, installment costs, and one-time charges have to factor into the procurement cost savings equation.
- Overviewing the grand scheme of things:
- Crucially, there needs to be a company-wide consensus on savings strategies, complete with meticulously tracked metrics and swift action plans catering to arising savings opportunities.
- Creating a balanced approach:
- While immediate savings can be harnessed by monitoring spend and procurement adherence, viewing such yield as part of a wider strategic initiative rather than a standalone target can bolster lasting success. A careful equilibrium between measurable cost reductions and the overall wellness of the organisation is fundamental.
- Leveraging data for smarter decisions:
- If there’s any mantra you should be following in today’s digital age, it’s this: data is king. With e-procurement solutions, you gain access to a wealth of data – from supplier performance metrics to purchasing trends. This data empowers you to make smarter financial decisions, allowing you to invest resources where they offer the highest return. For example, you might notice from your solution’s analytics that a particular supplier consistently overcharges or under-delivers. Using this information, you can decide whether it’s time to renegotiate terms or switch suppliers altogether.
- Compliance and Transparency:
- A digital procure-to-pay solution boosts visibility and improves monitoring and auditing of purchases. This ensures they comply with internal and external rules. Issues or non-compliance can be identified and fixed quickly, preventing them from becoming major problems. This automated system also supports preferred supplier agreements. Once these are established in the system, your purchases are more likely to come from approved suppliers, improving compliance and uncovering potential cost-saving opportunities.
Looking to Increase Compliance and Reduce Annual Spend?
The adoption of cutting-edge procurement solutions like the ones offered by FutureLog can be transformative. Having a fully transparent spend management system profoundly enhances the identification and tracking of cost-saving opportunities, including:
- Efficiently automated reporting system producing comprehensive purchase summaries, general budget overviews, and specific item details.
- Comprehensive glimpses into spend versus budget and contract adherence, enabling robust cost savings and avoidances awareness.
- Dramatically reducing the amount of administrative work and eliminating manual or paper-based activities.
- Customising the procurement experience with user controls for purchasing, contracts, approvals, payments, etc.
- The potential to leverage accrued cost savings to augment leadership skills and elevate guest experiences.
From our experience, leveraging automated procure-to-pay processes has enabled some hospitality organizations to save up to 40% of their time and remarkably achieve up to 95% contract compliance, thereby boosting efficiency and outcomes.
To sum up, harnessing P2P solutions has the potential to touch every aspect of your procurement process positively. They can lead to smarter buying decisions, automation-induced efficiencies, better inventory management, and improved supplier relationships – all of these contribute to an overall cost-efficient operation.
As a savvy hotel owner, isn’t it high time you embraced this innovation and let your business reap the rewards?
