To Buy or say ‘Bye'?
Hotel Business Review|January - February 2020
Purchase department in any organization is important as, being the centre of successful supply chain management; it helps in improving your business. The top objectives of the department in the hotels, as in any other business are selecting a mix of suppliers who can provide the best prices and terms, reduce risk and ensure the security of supply, improve quality, pursue innovation, etc. The purchase department in the hotel industry has to deal with a wide spectrum of activities to ensure that the organization attains – and maintains – profitability. Ashok Malkani tries to evaluate the on how it deals with various objectives and the problems that it faces.
Ashok Malkani

Procurement process in a hotel is a complex function. The procurement or purchase department of a hotel plays a significant role in seamlessly running a successful and profitable business. A purchase manager has the responsibility of discovering sources for materials, contract negotiations, and payment terms. In hotel industry the purchase managers are intrinsically connected to the success of the business at nearly every level. In hospitality, procurement occupies a place of singular importance as it helps in not only supplying the organization efficiently but also producing value through optimal quality of goods. In this new digital age traditional hotels have to compete aggressively with new style accommodation, like AirBnB and similar services, fighting to cut costs without sacrificing quality or user experience.

Padmakumar K, Purchase Manager, The Leela Palace, Chennai, declares, “In any industry including Hospitality, procurement process is pivotal. In Hotel industry optimum procurement is the key for effective and desired output with minimal investment which certainly has its impact on company’s earnings. Procurement process has become more relevant today as there are multiple options available and careful evaluation has to be done to ensure that you get the best product at competitive price.

Bernad Fernandes, Procurement Manager, Sofitel Mumbai BKC too is of a similar view. He adds, “The purchase department acts as the mediator between the hotel and its vendors. Therefore, it is important for the department to coordinate efficiently between the two so that we can optimally use our resources keeping in mind our budgets and aim for maximum profitability of the organization. At the same time, we avoid any compromise on quality because we, at Sofitel Mumbai BKC, believe that quality is non-negotiable.

“As one may assume, the role of a purchase manager is not only confined to ordering supplies for the hotel. It is rather pivotal in terms of supplier analysis, strategic solutions in different circumstances and presence of mind to ensure that the operations do not go haywire. We cannot have the entire execution affected due to a small delay in placing an order or unavailability of materials. A Purchasing Manager’s responsibility includes seeking reliable vendors or suppliers to provide quality goods at reasonable prices, negotiating price and contracts, reviewing technical specifications for raw materials, components, equipment, etc. We also have to ensure minimization of pilferages, breakage, and spoilage of material, minimisation of operating costs, timely deliveries and minimisation of internal lead time.”

D.V. Shende – Materials Manager, The Leela Mumbai stresses the need for constantly evaluating the quality and cost of the materials. “it’s important to meet the 5 R criteria that is, to purchase products of the Right Quality, in the Right Quantity, for the Right Price, in the Right Place and at the Right Time,” he says.

He continues, “Purchase Manager’s core responsibilities are spread across a gamut of functions which includes developing, leading and executing purchasing strategies, tracking and reporting key functional metrics to reduce expenses and improve effectiveness, forecast price and market trends to identify changes of balance in buyer-supplier power, assess, manage and mitigate risks, determine quantity and timing of deliveries, monitor and forecast upcoming levels of demand and more, till closing of the deals with agreed-upon terms & conditions.

Sanjay Bali, Director of Purchasing, Four Seasons Hotel Mumbai, disclosed that day-to-day requirements of internal departments like Housekeeping, Engineering, F&B Production, F&B Service are also taken care by the Purchase Department. He iterated “purchase department has many functions apart from the Procurement of materials from the local and international market. It has to record goods in the system, do inventory control as per the standard of the Hotel policy and process. Purchase is always in touch with vendors for the latest market trends in terms of new products and services. Purchase is also maintaining the stock of goods required for the day to day functions of the Hotel and it helps in the smooth operation of the Hotel. Purchase department controls the Inventory on the supply chain management of the vendors.”

Sanju Shirodkar, Purchase Manager, The Leela Goa, opines, “I feel having a purchase department in every organization creates a big difference in procurement; a proper functioning manpower system helps you in getting the right product in terms of quality, quantity, and price from the right supplier.”

Problems Faced

As can be seen purchase department’s job is not all hunky-dory. There are several problems that they have to face. They have to be in constant touch with the user departments. At times there is a gap in communication, which will result in inappropriate products being sent to the departments. There are also several other problems.

Sanjay believes that a major problem is the urgency of the requirement. He attributes this to inadequate planning. He adds, “The demand for perishable and raw materials is increasing while the supply, due to climatic conditions, is decreasing. To get the regular supplies from the vendor we need to follow the market current rate and get the goods from the vendor at a mutually agreed rate.

Climatic changes are also cause of concern for Shende. He states, “Climate change is no longer a distant, slow-moving emergency, it is an actual crisis which if not tamed would have adverse effect on the global economy. A major emerging challenge faced by us nowadays is sourcing material under uneven weather conditions. This problem will continue to prevail in the future as well and would cause disruptions in managing the procurement process.

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