Many hospitality chains are shifting their focus from partnering with lowest-cost suppliers to finding partners that offer the best overall supply relationship.
markup of the landed cost. But if the company doesn’t have access to landed cost data, how does it know it is paying the right price?” asks Jeff Smith, vice president of marketing at foodservice software developer Instill Corp., Redwood City, Calif. Hospitality operators look to companies such as Instill to pro- vide transportation information as part of spend management, or work with distributors to receive that information, he adds. Others turn to third-party logis- tics providers to manage the movement of raw ingredients and supplies. Pizza chain Papa John’s, for example, uses UPS Supply Chain Solutions to coordinate its inbound distribution network, delivering cheese, dough, pepperoni, and tomato sauce to its more than 3,000
casting sales, it will run out of food immediately because it buys special- ized goods that aren’t always readily available,” says Spies. Small opera- tors generally fail to conduct proper forecasting, he says, even though today’s point-of-sale systems can produce the required data. PUSHING the ENVELOPE Cutting-edge hospitality chains are reaching beyond inventory con- trol systems to spend intelligence tools, which help gather, rationalize, and analyze historic and real-time purchasing information. Tapping the real-time inventory capabilities of these applications enables opera- tors to closely monitor and respond to demand swings, and helps them rate distributors and manufacturers ca im ize av to fo to pr P ar tro
stores in a timely and streamlined fashion. Its partnership with UPS SCS helps Papa John's optimize distribution and guarantee product freshness. Hospitality companies often embrace third-party solutions and services when growth spikes and business becomes too complex to control internally. Outsourcing also can help hos- pitality businesses that must comply with differing sets of brand sourcing requirements. FINDING the ROI Enterprises employing spend management, procurement, audit/compliance, and inventory systems typically save two percent to five percent of their total spend, says Instill. While that sounds like a low number, it can have a big impact. “When companies spend millions of dollars, cutting costs by half a cent per dollar adds up to a lot of money,” says Rupert Spies, senior lecturer, Cornell School of Hotel Administration, Ithaca, N.Y. “For companies operating with thin margins, such savings are even more important.” Though hospitality companies are making gains by utiliz- ing technology, the industry still lacks standard application programming interfaces to reduce the cost of integrating technology solutions, says Tina Stehle, vice president and general manager of Agilysys Hospitality Solutions, a Boca Raton, Fla.-based hospitality software provider. New deliv- ery models such as Software as a Service, however, help make implementation more accessible to smaller entities. “The hospitality industry is particularly risk averse, and Web-based software solutions allow businesses to get their feet wet with technology,” Smith says. These solutions will greatly impact technology adoption in the hospitality indus- try, he predicts. The improved visibility and inventory control these tools deliver also feeds better forecasts. “If Red Lobster or Darden Restaurants does a poor job fore-
on service quality. These tools ensure that supplies neither build up nor deplete, and next-generation applications will automate the actions required to resolve such issues. Integrating inventory management and business intel- ligence applications with Web services to deliver real-time data is another increasingly common IT request from hospi- tality operators, Stehle adds. Such real-time data is particularly helpful for ensuring food safety. Restaurants and hospitality businesses are explor- ing new ways to ensure traceability and safe handling of food from field to table. “Restaurants today face an increased need to assure cus- tomers that they know where food comes from,” says Spies. Certification, controls, and spot checks are also common now, he adds. Because of these issues, many hospitality chains are shifting their focus from partnering with lowest- cost suppliers to finding partners that offer the best overall supply relationship. For some large hospitality operators, gaining control means delving even further back in the supply chain and getting involved directly with commodities. “If a company routinely buys huge quantities of cheese or beef products, for instance, hedging can help stabilize prices,” says Spies. Some companies go further still: New York City caterer Great Performances purchased a farm to guarantee a direct supply of seasonal fruits and vegetables. Such innovative practices are becoming more common- place in the industry, as chains move to adapt to a changing marketplace and keep up with customer demand. While the hospitality industry is still considered not quite bleeding-edge when it comes to adopting the latest supply chain thinking and technologies, large enterprises are starting to close the gap. By adopting new tools and processes, the industry is solidifying its belief that truly satisfying guests means taking a trip back to the basics – sourcing quality food, beverages, supplies, and services. ■
162 Inbound Logistics • July 2007
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