Using Tech to Support Supply Chain Management in Hospitality
Today's economic and logistical landscape demands brands put increased effort into supply chain management. With global disruptions ranging from pandemic-induced shortages to geopolitical tensions affecting trade routes, resilience and redundancy for mission-critical items must be a top priority. Companies have to work to mitigate risks, ensure continuity, and adapt to ever-evolving market demands.
Hotels, resorts, vacation rentals, country clubs, and other client-service venues, with their varied needs and multi-location structure, rely on strong solutions to overcome the challenges of supply chain management in the hospitality industry. This article shares the best decisions procurement and finance teams can make to ensure continuity in their operations and long-term success for their properties. It also highlights how technology can make accomplishing these objectives easier.
Download the free tool: Hotel Budgeting Template
What is supply chain management in the hospitality industry?
Supply chain management (SCM) is the strategic coordination of a company's operations and interactions within the supply chain. SCM strategies aim to deliver high-value services and cost-effective goods while reducing the impact of supply chain issues.
Supply chain management is a series of activities that move organizations toward better outcomes, including:
- Strategic sourcing
- Volume purchasing
- Contract negotiation
- Order processing
- Inventory control
- Freight logistics
- Warehousing
- Spend analysis
A well-managed supply chain is crucial for hotels and other hospitality venues. It involves negotiating contracts, managing inventory levels to prevent overstocking or shortages, and coordinating logistics for the timely delivery of goods. By efficiently managing these elements, hospitality businesses can reduce costs, improve operational efficiency, and enhance the overall guest experience.
Hotel Budgeting Template
Growing a hotel business calls for strong process, cost savings, and commitment to guest satisfaction. Download this hotel budgeting template to achieve all three.
The essential elements of a hospitality supply chain
In the hotel industry, procurement or FF&E (furniture, fixtures, and equipment) teams manage the flow of goods, services, and information to every location. Hospitality procurement covers the following categories:
- Food and beverage
- Dining and kitchen supplies
- Linens and towels
- Cleaning and maintenance
- Guest consumables (like shampoo, conditioner, and lotions)
- Furniture and fixtures
- Decor
Challenges of supply chain management in hospitality
The hospitality industry's fast-paced nature and logistics obstacles present challenges to efficient supply chain management. Seasonal demand fluctuations, quality and consistency requirements, and the wide variety of supplies necessary make it difficult to maintain effective supply chain processes.
Many hospitality brands deal with these common challenges in administering procurement functions:
Market fluctuations: The hospitality industry often sources goods from across the globe, making it susceptible to international market changes and trade policies that can disrupt supply chains.
Seasonal demand changes: Hospitality businesses experience significant differences in demand based on seasons, holidays, and events, requiring flexibility and adept inventory management.
Quality control issues: Maintaining consistent quality across various products and services, especially when dealing with multiple suppliers or vendors, presents a significant challenge.
Logistical complexities: Ensuring timely receipt of goods can be a struggle since deliveries must occur across various locations, sometimes spanning several states or even multiple countries.
Risk management: The high volume of purchasing and potential need for numerous vendors increase procurement risks. Dealing with risks related to supplier reliability, product availability, natural disasters, or geopolitical issues requires a robust risk management and supply chain strategy.
How can hospitality supply chains become more sustainable?
Consumers are increasingly conscious of environmental impacts, and many favor brands committed to sustainable practices. Sustainability in hospitality supply chains isn’t just an environmental imperative but a smart business decision that can improve brand reputation and guest satisfaction while enabling cost savings.
Embracing sustainability is a holistic approach that benefits the environment, bolsters customer satisfaction, and drives operational efficiencies. Sustainable hotel operations may yield substantial savings through reduced resource consumption and control of waste management costs. Sustainability practices typically begin in-house but should extend to the practices of your third-party suppliers where possible.
Prioritize sustainable suppliers: Make a list of preferred vendors, prioritizing those that use sustainable methods to produce and transport their goods. There are many ways to accomplish this, such as:
- Buying perishable food and beverages from organic and local farmers to reduce transportation costs and lessen environmental impact
- Preferencing vendors with sustainability certifications or published environmental, social, and governance (ESG) practices
- Managing inventory with volume purchasing to reduce freight impact and costs
Embrace energy efficiency: Consider renewable energy sources (both internally and for external suppliers), such as solar panels, to power operations. When seeking suppliers, give preference to vendors that use sustainable production methods.
Find eco-friendly amenities: Offer guests biodegradable toiletries that align with their expectations. Ensure hotel amenities, like spa products or gym towels, are made of natural or recycled materials.
Use sustainable freight options: Look for opportunities to ship goods using renewable or lower-carbon fuels. Consider freight options that reduce or consolidate individual shipments to conserve fuel and lessen emissions.
Digitalize processes: Reduce paper consumption through procurement technology that allows buyers to eliminate manual processes. Digitization helps minimize paper use while speeding up the purchasing process.
Train staff on sustainability practices: Regularly educate staff about sustainability goals and practices to ensure they are correctly implemented throughout procurement.
Seek green certifications: Pursue sustainability certifications from recognized organizations and highlight these commitments in marketing materials. Transparency about efforts can significantly boost a brand's reputation among environmentally conscious consumers.
Top 5 hospitality supply chain management best practices
Adopting best practices in hospitality procurement not only streamlines operations but can also help brands achieve significant cost savings and reduce negative environmental impacts. By prioritizing good practices, businesses can enhance their brand reputations, meet consumer demands for eco-friendliness, and drive profitability through efficient hospitality management.
- Build strong supplier relationships: Good partnerships are crucial for improving supply chain management. Businesses can ensure a consistent supply of high-quality products and services by fostering open communication, reliability, and trust with vendors. Collaborative problem-solving and strategic partnerships not only improve efficiency but also lead to innovations and cost savings. Regularly evaluating and providing feedback on supplier performance strengthens these relationships further, creating a resilient supply chain that can adapt to changing market demands.
- Negotiate for volume pricing: Volume purchasing plays a pivotal role in optimizing supply chain management. By securing discounts based on bulk purchases, businesses can significantly reduce the cost of goods sold to increase overall profitability. This strategy enhances a company's purchasing power and fosters stronger relationships with suppliers. Vendors are often willing to offer more competitive rates for larger orders, seeing it as an opportunity to secure steady business and improve their own production planning and efficiency.
- Diversify suppliers: Building supplier redundancy into procurement is essential for fortifying supply chains against disruptions. By identifying and engaging multiple providers for critical components, businesses can mitigate the risk of shortages and ensure continuous operations—even when primary suppliers face challenges. This strategy involves thorough market research to evaluate potential providers' reliability and capacity. Establishing relationships with alternative suppliers provides safeguards and gives companies leverage in negotiations, potentially allowing them to improve terms and reduce costs.
- Incorporate demand forecasting: Analyzing historical sales data, market trends, and other relevant factors helps buyers and finance teams anticipate customer demand. Using demand forecasting to bolster supply chain management leads to more effective inventory management and reduces the risk of overstock or stockouts. Companies can refine their forecasting models even more with advanced analytics and AI technologies. This helps them optimize operations, improve customer satisfaction, and minimize unnecessary costs.
- Use technology: Leveraging advanced technology tools in supply chain management transforms operations by enhancing transparency, efficiency, and resilience. Technologies like procurement management, freight optimization, inventory controls, and reporting tools facilitate visibility across the supply chain, enabling proactive problem-solving and decision-making.
To see how Lark Hotels uses technology to improve its supply chain management system, check out our Lark case study here.
Hotel Budgeting Template
Growing a hotel business calls for strong process, cost savings, and commitment to guest satisfaction. Download this hotel budgeting template to achieve all three.
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How to incorporate technology to improve your supply chain
Incorporating technology into hospitality supply chains offers many benefits, from inventory tracking and vendor management to better demand forecasting and budgeting (beyond what a simple hotel budgeting template can offer). These advancements make it easier to understand the supply chain, manage costs, and ensure performance.
Consider the following ways technology can help surface insights and drive efficiency for hospitality businesses:
1. Leverage data analytics
Businesses can use spend analysis and data insights to enhance supply chain management. By analyzing procurement data, companies can identify trends, predict future demand, and optimize inventory levels to reduce waste and increase efficiency.
Data analytics also enable more precise forecasting, better decision-making, and improved supplier negotiations by providing insights into performance and market conditions. This approach streamlines operations and supports sustainability by minimizing overproduction and excess stock.
2. Create a centralized intake process
Creating a centralized purchase requisition process helps companies streamline supply chain management. Centralizing the intake of purchase requests helps finance and procurement teams gain better control over their purchasing activities. This method simplifies the approval process, reduces procurement times, and ensures consistency in purchasing decisions.
Centralization also fosters transparency across departments, allowing for efficient budget monitoring and spend analysis. A centralized system aids in preventing maverick spend, ensuring that all purchases align with company policies and negotiated contracts, thus optimizing supply chain operations.
3. Use freight logistics software
Using freight logistics software significantly enhances a supply chain management strategy by optimizing routing, enabling real-time shipment tracking, and reducing transportation costs. Technology provides insightful analytics, allowing companies to make data-driven decisions for efficient freight management.
Software also improves communication between all stakeholders, ensuring timely deliveries and minimizing delays. By using automation for tedious tasks associated with freight logistics, companies can focus on strategic planning and customer service to drive overall business growth.
4. Use a procurement platform
Implementing a procurement platform brings all aspects of the purchasing process into one place, allowing businesses to consolidate their supplier base and leverage bulk buying. This not only reduces costs but also enhances supplier relationships by fostering closer collaboration and communication.
Procurement platforms offer features like automated bidding and contract management, which further optimize operational efficiency. By centralizing purchasing data, companies can gain valuable insights into spending patterns and identify opportunities for cost savings, which contributes significantly to improved supply chain management.
Use Order.co to improve supply chain management in the hospitality industry
While plenty of software options can help hotels and hospitality organizations manage various aspects of their supply chains, Order.co enables these companies to control every step in procurement in a single, centralized location. From strategic sourcing and built-in stockout support to invoice processing and reporting features that aid demand forecasting, Order.co gives brands the flexibility and visibility they need to reduce costs, improve operational efficiencies, and enhance the employee and guest experience.
To learn more about effective supply chain management using Order.co, schedule a demo.
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