Event Review: Hotelier Procurement Summit 2013
More than 120 procurement professionals from across the Middle East hotel industry attended the first ever Hotelier Middle East Procurement Summit at the The Oberoi Dubai on November 19.
The day saw an assortment of purchasing experts host a series of panel decisions and workshops on a range of topics such as international best practices, brand standards, people management skills and e-procurement systems.
During the course of the event, procurement experts from hotels in the UAE took a strategic look at the way they do business, network with their peers, and benchmark practices against the best in the region.
The event began with a key-note speech from Bhanu Pratap Singh, director of procurement at Atlantis, The Palm and Hotelier Middle East’s Procurement Person of the Year 2012.
Singh began by reminding the crowd about the challenge facing all purchasing managers who must ensure that “the hotel has to run to the expectations of the customer, while also having to run to the financial limits of the owner.”
He warned his fellow hoteliers of the dangers of being motivated solely by cost in purchasing decisions.
“How do you select the best possible service when you are going for the lowest possible cost? You can’t always go for the lowest price as that does not help the hotel improve and deliver the best service,” asserted Singh.
“Unless we move away from cost being our primary driver, we can never improve,” he added.
This was also an issue raised by one of the day’s expert panellists Pushpa Nair, director of procurement at the Crowne Plaza Dubai and the winner of Procurement Person of Year in this year’s Hotelier Middle East Awards.
Nair, who hosted the opening panel entitled ‘International Best Practice — where does the region stand”, drew a distinction between cost and cost value.
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“Instead of simply focusing on cost only, cost value should be the primary concern of the hotel,” said Nair.
Wissam El Cheikh Hassan, managing partner of Al Dar Sweets and GM of Dar Al Zakhrafa Décor — previously purchasing manager at Procter & Gamble in Dubai — responded that if the procurement manager is doing their job properly, they should be able to lower cost without impacting quality.
“The reason you are hired is to buy, and by doing your job properly, observing the market, you will lower the price, without necessarily lowering the quality. As this is a fundamental part of the role, that is why cost savings should be a targeted part of the role,” said Hassan.
“Changing approach or attitudes towards buying comes under strategy; get better prices not by negotiating but by sourcing. How fast are you changing, how often are you changing and why are you changing,” added Hassan.
He recommended centralised purchasing among hotel chains in the UAE as one solution, highlighting the umbrella approach of Starwood Hotels and Resorts as an example of best practice.
Hassan also suggested that efficiency could be enhanced with the use of specialists and category management, for example, different people to source F&B products, FF&E etc.
Evolving roles
On the subject of where the Middle East hotel procurement business stands in comparison to other regions, the panellists said it was time for procurement managers to be more strategic, ideally evolving their roles into business development.
“What is the target of your organisation and how does it feed into the procurement department? There is a gap. That gap is strategy,” said Hassan.
“If you look at international best practices, one thing [we are] missing is strategic orientation — meaning what we want out of every deal, not only based on financial parameter,” agreed Singh.
“We need to step out from procurement into business development,” he asserted.
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“We have to think beyond our role and help the business from the forefront. Step out of predefined roles — we have to move ahead. You need to understand the business needs first,” Singh told the room.
He urged his peers to grab a “bigger piece of the decision-making pie”.
“It’s very important to keep challenging yourself. How can we bring more efficiency to the process? I’ll give you an example — we all use a smartphone, the old era of phones has gone. So now why do we not use the best tools [in our roles]” said Bhanu, recommending investment into modern buying systems.
“What you did in 10 minutes you have to do in two minutes,” agreed Nair.
Aside from strategy, Sohail Ahmed, materials manager, Hyatt Capital Gate, spoke up from the audience, suggesting that when it came to international best practices, the Middle East was behind on three counts: sustainability, sourcing from local suppliers, and e-procurement.
The panelists agreed sustainability was important, but Hassan argued that “the industry has to walk before it can run. It must dedicate time to it”.
E-procurement
The issue of e-procurement dominated several of the panel sessions, with delegates divided as to how useful online systems could be.
One concern raised by Zahid Aslam, area director of purchasing, Shangri-La Hotel Dubai, was that there was a risk of it limiting decisions because only a certain percentage of suppliers would be listed on each system. Others questioned that the potential risk of e-bidding was that it would bring decisions back to price — something the industry is trying to move away from as a sole motivator. Having already implemented e-bidding at Atlantis, Singh said there were multiple tools available and that in his experience, it still meant all opportunities were open.
“It’s not just financial parameters,” he said. “Our system creates feedback based on how the supplier is performing so far with us,” he added, accepting there was a risk factor with new companies, which would need to be quantified.
Manesh Balani, director, Direct Hotel Supplies, (DHS) & Orsini SPI, said “online purchasing in the Middle East has not reached the level of Europe or the US”.
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“We may be effective at using e-procurement to manage process, paper flow and sharing of information, but I think [when it comes to] the final process of online purchasing we haven’t reached that stage yet,” he said.
The myth of three quotes
Another issue to rear its head throughout the day was the “myth” that procurement managers should rely on three quotes. At the start of the panel entitled “Game Changers — which planning and research strategies will guarantee success”, Shangri-La’s Aslam was quick to debunk the traditional practice of three quotes.
“Hoteliers have a myth that if you have three quotes, you will get the best price. In my opinion you can have 20 quotes and there is no guarantee you will get the lowest possible price,” he asserted.
According to the panellists on the third session, entitled ‘Attaining the Best Value while maintaining a property’s standards’, the issue of getting the best quote was related to appropriate levels of communication with vendors.
Radha Valiathan, procurement manager, Jumeirah at Etihad Towers, said suppliers worried that if they quoted their best price initially, they would then be asked by the hotels to lower it.
“We need to get away from this,” he said. “It is better to deal with companies directly, but that all depends on their availability and communication channels. But if you source a product directly then you should speak with them, which will improve service and standards.”
He also advocated centralised purchasing to enhance purchasing power, while DHS’ Manesh Balani said e-procurement enabled fair judgement.
“We have to find a way to avoid fish market bargaining where hotels are trying to get suppliers to undercut each other. E-procurement allows suppliers to put out their very best price and benchmarks — that makes the procurement system so much easier.”
Ultimately, according to Crowne Plaza’s Nair, success in this area comes down to partnerships. She said she is not afraid to ask suppliers what their costs are and to share her own costs, in order to come to an agreement to benefit both parties.
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Case study: Atlantis, The Palm
In his key note speech, Bhanu Pratap Singh, director of procurement at Atlantis the Palm, outlined six steps he implemented to ensure maximum efficiency in procurement at the Palm Jumeirah hotel.
1. Vendor prequalification and registration
It is vital to identify right the partner and to do this, Atlantis’ parent company Kerzner has a dedicated website: www.kerznerprocurement.com
2. Securing best offers and prices
Singh criticised the traditional process of seeking three quotes and choosing the lowest one. Instead, he said Atlantis looks to the supplier that can deliver the best value on the table. “How can you get the best product if you always select the lowest price?” he asked.
3. Safety and risk compliance
Atlantis, The Palm introduced a vendor on site audit. So far, it has visited 58 F&B suppliers. Of these 33% couldn't pass the threshold in the first audit. Instead of dropping these suppliers, Atlantis asked them to work with the hotel to meet the required stanbdards. The vast majority agreed and of the 58, only four vendors have been dropped.
4. Sustainable vendor relationship
This involves supplier performance reviews and setting up KPI scorecards. The hotel involved procurement, finance, receiving — internal stakeholders. Atlantis has met with 46 companies so far, and according to Singh, “not one has said this process of reviewing the partnership has not added value to them or us”.
5. Contracts lifestyle management
This involves contract drafting and online approval, managing sales, tracking contract utilisation and contract repository. The problem is that most discussions are verbal, said Singh, so you need to identify in black and white exactly what you want the supplier to perform upon.
6. Spend management
The last step is the classification of spend data and spend visibility to stakeholders. This involves the identification and tracking of new initiatives.