The Top 7 Pain Points in Hospitality Procurement and How to Overcome Them

By Johannes Vocke, FutureLog Chief Financial Officer

Siloed and fragmented procurement software often complicates the procure-to-pay process. Outdated solutions are typically expensive, inflexible, and inefficient, yet many organisations persist in using these antiquated systems. This reliance on old-fashioned procurement management systems hinders operational efficiency. 

A 2023 Procurement Insights report reveals that 80% of organisations still depend on manual or semi-digital tools to manage their P2P cycle. These businesses typically utilise ERP or accounting software—an approach comparable to using a flashlight to crack a nut. While it gets the job done, it is far from the optimal tool for the task. 

Such misalignment eventually leads to substantial operational issues. The repercussions of relying on outdated procure-to-pay software, or worse, having no solution at all, will inevitably harm an organisation’s financial stability. To remain competitive, businesses must transition from traditional methods to embrace digital solutions. 

Identifying and overcoming procurement challenges is crucial, since procurement directly affects an organisation’s bottom line. While these challenges can vary based on an organisation’s size, industry, and specific needs, several common procurement challenges universally impact hospitality businesses. 

1. Navigating supplier-relationships 

One of the most significant challenges in procurement is supplier management. The process of identifying the right suppliers, tracking vendor performance, and ensuring a consistent supply of quality products is fraught with complexities. 

2. Risk mitigation

Supply risk is a persistent challenge in procurement. Market risks, potential fraud, cost, quality, and delivery issues form the core of these risks. Compliance risks such as anti-corruption and policy adherence also add to the concerns that keep procurement leaders awake at night. 

3. The issue of maverick spending 

Purchases made outside the defined procurement process, often termed dark purchasing, can be costly for businesses. Uncontrolled spending can result in unjustifiable capital outlay or excess inventory, leading to significant revenue loss and diminished control. 

4. The challenge of maintaining transparency

Spreadsheets initially help organise data, but as data volumes grow, they become cumbersome. Issues such as data access, security risks, and potential errors arise. Automating the procurement process significantly enhances transparency and provides additional benefits. 

5. The pitfalls of inaccurate data

Accurate and reliable data is essential for sound procurement decisions. Incorrect procurement data can lead to inventory shortages or excesses, directly impacting an organisation’s financial performance. For procurement leaders, maintaining accurate records is critical to mitigating issues like chargebacks. 

6. Dissatisfied customers, vendors, and procurement teams 

Inadequate supplier service levels not only escalate costs but significantly impact guest satisfaction and employee morale. Navigating procurement challenges in the hospitality sector necessitates a balanced approach to maintaining supplier relationships, integrating effective eProcurement software, and streamlining the procure-to-pay process. An imbalance here can create a supplier-dominated environment, restricting negotiation power and reducing supplier alternatives. Addressing these issues is crucial for improving overall operational efficiency and stakeholder satisfaction. 

7. Technological Hesitation 

Resistance to digitising practices remains a significant barrier to achieving streamlined procurement processes. The reluctance to integrate advanced procurement systems hampers operational efficiency and prevents organisations from fully capitalising on automation and data-driven insights. This technological inertia often stems from a lack of understanding of the potential benefits and a fear of disrupting existing workflows. Overcoming this barrier is crucial for procurement teams to enhance productivity, ensure compliance, and drive cost-effective procurement practices

Eliminating Chaos in Procurement Strategies

Experts have proposed various strategies over time to manage chaos within an organisation’s procurement arm.  Some recommend setting cost limits that mandate higher authority involvement for orders exceeding a certain value. Others advocate segregating duties within the procure-to-pay cycle. However, the most comprehensive approach that encompasses all these solutions and more is automation.  

A recent Gartner report suggests that by 2025, over 50% of organisations globally will have implemented a cloud-based procure-to-pay suite. Tools like FutureLog are increasingly popular as hospitality businesses recognise procurement software’s significant benefits and cost-saving prospects. Here are some key ways to enhance purchasing efficiency: 

Ensuring Quality and Transparency

Long gone are the challenges of sifting through cluttered file cabinets or wrestling with complex spreadsheet formulas. An automated e-procurement system ensures immediate and easy access to crucial information, eliminating the risk of lost orders due to poorly managed documents. It offers complete transparency across the entire process. This allows you to instantly pull up the status of any task, analyse vendor performance metrics, and more, using custom reports and analytics.

Enhancing Workforce Efficiency 

With automated e-procurement systems like FutureLog handling the minutiae of procurement processes, employees are liberated to concentrate on tasks demanding human intuition and creativity. The software automatically generates purchase orders from approved purchase requisitions and initiates the PO dispatch process, while mobile support ensures that approvals aren’t held up in email inboxes.

Better Supplier Management

Transitioning to digital vendor management transforms how procurement teams evaluate and rate vendor performance. With a robust procure-to-pay tool, selecting the right vendor based on performance, pricing, discounts, delivery adherence, and policy compliance is straightforward and efficient. By automating processes, suppliers can rest assured they will consistently receive timely communications and payments, making them more likely to negotiate the best prices.

Enhancing Accuracy  

Procure-to-pay software enables organisations to conduct three-way matching to ensure fool-proof purchasing, approve invoices, manage exceptions, and integrate seamlessly with electronic payment or accounts payable systems.

Ensuring Compliance 

Procurement software guarantees that every task conforms strictly to company procurement policies and governmental regulations. Digital procure-to-pay software streamlines the purchase request process, routing it to all necessary stakeholders and approvers in sequence, thereby eliminating cumbersome email threads. The automation process reduces the likelihood of human error, as each step is meticulously directed by the e-procurement solution. 

Leveraging Analytics for Informed Decision-Making  

Beyond refining manual procurement practices, automation unlocks benefits unattainable through traditional methods. Actionable insights, afforded by comprehensive data access and customisable report templates, allow for detailed analysis, identification of bottlenecks, and process optimisation, even down to the most fundamental tasks. 

Ultimately, the hospitality sector’s inherently dynamic nature, characterised by fluctuating demand and seasonal variations, presents substantial challenges in accurately forecasting requirements and effectively planning procurement activities. Inaccurate forecasts often result in either overstocking, which ties up valuable capital, or understocking, which risks missed sales opportunities and customer dissatisfaction.

Automate Procurement with P2P Technology

By embracing such a comprehensive, cloud-based solution, hospitality organizations can streamline their procurement processes and drive significant operational efficiencies. This strategic move not only reduces costs but also positions businesses to adapt swiftly in a dynamic market landscape.