Ms. Stehle

Guest Service / Customer Experience Mgmt

Think Reducing Costs and Enhancing the Guest Experience are Mutually Exclusive?

By Tina Stehle, Senior Vice President & General Manager, Agilysys Hospitality Solutions Group

To truly affect the bottom line, leading hotels are examining every link in their supply chains to find the best ways to implement cost controls that offer long-term financial benefits without sacrificing the quality of the guest experience. Many hotel operators are surprised to learn that during the purchasing, receiving, and inventory management process, profits can erode despite their best efforts to negotiate the best price and control costs.

Why It's So Important to Automate

As a hotel owner or manager, everything in your training tells you that operational inefficiencies result in a higher cost of doing business. But once your hotel has found the magic formula of finding the right products, at the right price from reliable suppliers, it's sometimes hard to upset the apple cart if internal process owners don't relate to your bottom line concerns.

Wouldn't it be ideal if your inventory and procurement system could provide you the right product, price and reliable suppliers in the most efficient manner possible? Our inventory and procurement customers report typical savings through efficiencies and direct cost reductions in the range of 5 to 15 percent. One example of a direct cost reduction is driving down the cost of products and services by implementing an automated bid system. An automated bid system allows hotel operators to quickly and easily increase the number of potential suppliers and facilitates the process of identifying low-cost, preferred, and un-preferred vendors.

As you know, it is becoming increasingly important to control operational expenditures in the hospitality industry. While many hotels still rely on manual or semi-automated processes to identify, evaluate, and select suppliers and award contracts, increasingly the most forward-thinking hotels are finding ways to automate and optimize their supply chains. This tight alignment ensures the hotel organization and its budget process support its procurement strategy.

In most hotels, the cost of purchases can range from 15 - 30 percent of sales, depending on the type of hotel. This can have huge implications on your bottom line, not to mention the day-to-day purchases of non-perishable items such as office supplies, guest amenities, housekeeping supplies, and other highly consumable items which are critical for the successful operation of your hotel.

Manual processes are also more prone to human error and often fail to accommodate future growth. Automating your inventory and procurement process allows you to negotiate lower costs for goods and services, while reducing transaction and administrative costs. Plus, you can monitor, control and reduce expenses, while improving your hotel's competitive advantage by insuring the rights goods and services are always available. Now, that's enhancing the guest experience!

The Many Benefits to Automating

A successful inventory and procurement solution frees up working capital by reducing the amount of inventory you must carry on your books and pack away in storage. Such a solution can help you get new products and services to market faster by quickly locating and sourcing key components as required. And, you can maximize your organization's buying power by aggregating the purchasing of all departments and locations, for mission-critical items as well as for those hundreds of "incidentals" that add up to big dollars if purchased at an exorbitant rate and then multiplied by thousands of pieces.

Hotels that utilize an enterprise-wide paperless system reduce labor costs while improving controls and accuracy. With a single platform that controls all aspects of materials management, you can optimize existing resources while preventing unnecessary costs. The system can automatically detect when an inventory item is running low, generate a purchase order as a part of a pre-existing contract, or issue a request to vendors to bid an item. Now that's enhancing the guest experience!

For highly variable food & beverage items, you can monitor variations in costs and determine which items are high cost/low sales versus those that fall into the more desirable low cost/high sales category. Now, that's good for your business!

Top Features to Consider

Many of today's top hotels and casinos have already chosen to automate their entire inventory and procurement process at one property or across multiple locations with a comprehensive materials management system. Their primary business objective is to improve productivity and cash flow while reducing labor costs and waste. Hotel owners have told us that tasks that once took hours or days to complete can now be done with a few clicks of a mouse. And they're pleased that their employees can eliminate time-consuming, error-prone paper documents.

According to these hotel owners, a materials management system allows their buyers to concentrate on the more strategic elements of the purchasing process. And, an effective system also allows functional managers, such as food & beverage directors, to focus on guest-centric activities instead of the inventory and procurement process. Again, that's enhancing the guest experience.

Hotel owners have also commented to us that their new materials management system provides helpful internal controls. These internal controls allow them to publish contract pricing across multiple locations, closely monitor the use of these prices, and set purchasing approvals to ensure the use of pre-negotiated pricing by employees at all levels. Automated, electronic document routing based on flexible business rules speeds the process along and provides a useful workflow framework.

Hotel and casino operators are also able to maintain cost controls in the food & beverage operation. For example, those who have already implemented our specific menu and recipe analysis module have found that they are now more informed about the most appropriate and economical types and quantities of food. By being able to automatically price recipes based on receipts, our hotel owners are able to see a real-time view of the menu item's overall profitability. In addition, they can now cross-reference menu items and recipe ingredients, flag recipes for excessive cost, review nutritional analysis and perform helpful menu engineering calculations.

One of the reoccurring challenges for many food & beverage directors is the consistency of the guest experience. To meet this need, a recipe card system can provide standard ingredients, preparation & plating instructions, and even serving suggestions in an easy-to-use format.

A comprehensive inventory and procurement solution will also integrate well with your other systems, including your financial and point-of-sale solutions. This integration saves time and reduces errors by sharing data electronically between systems without the need for manual effort.

Other important features to consider for your next inventory and purchasing solution include the ability to evaluate current suppliers and define future sourcing objectives, strategies and priorities. The solution should also allow you to create a sophisticated data repository that draws from your existing ledgers and buying history.

In the near future, expect the ability to include reliable, accurate market intelligence reporting based on past transactions, which is important for effective supplier negotiations. Plus, top inventory and procurement solutions will make it easier to forecast with a business intelligence component that pulls data from your inventory and procurement system and then makes it available to functional managers and executives through customizable dashboards. Lastly, visionary companies will extend their solutions to include web-based supplier portals and other supplier enablement functions to further streamline the process.

In short, technology can ease the inventory and procurement burden by automating the process, optimizing your supply chain, improving financial controls, and enabling better decision making. As previously mentioned, currently our materials management system users report typical savings through efficiencies and direct cost reductions in the range of 5-15 percent. This is why 80 percent of the top 20 largest hotels worldwide choose to utilize our solution.

A streamlined, high-tech procurement strategy is no longer a luxury for most hotels, it's a necessity. A successful solution will balance the requirement to reduce costs and improve profitability with the need to deliver superior guest service. The challenge is taking the leap and choosing which solution is best for you.

Tina Stehle is senior vice president & general manager of Agilysys Hospitality Solutions Group. Agilysys is a leading provider of innovative IT solutions to corporate and public-sector customers, with special expertise in select markets, including retail and hospitality. The company uses technology — including hardware, software and services — to help customers resolve their most complicated IT needs. Ms. Stehle joined Agilysys in 2004 through its acquisition of Inter-American Data, Inc. (IAD), where she served as vice president of software services. Ms. Stehle can be contacted at 800-262-3600 or tina.stehle@agilysys.com Extended Bio...

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