Procuring goods for hotels? Make sure you avoid these Top 10 mistakes!
Getting the right materials at the right time and cost and ensuring quality is what a reliable procurement system should 'ideally' do. However, instead of 'ideal' we focus on 'functioning right'. So, here is a list of Top 10 mistakes that can be avoided during procurement.
Speed, efficiency, and accuracy are the major goals that are to be met by a reliable procurement system in hotels. Human or organizational errors happens despite all precautions which negatively affects a company healthy functioning. We got in touch with a few Procurement Managers; Satish Rajput, Materials Manager - Taj Swarna Amritsar , Ashok Samal, Manager – Purchase (Corporate) - MAYFAIR Hotels & Resorts Ltd. and Manish Kumar Jha, Head of Procurement - Hamstede Living Pvt. Ltd. and have curated the top 10 common procurement mistakes/problems that should be avoided:
1. Vendor selection process: Currently it is very difficult to identify the competency and experience of the vendor especially in Tier B & C cities, whether he will be able to meet our requirements or not. We should realign our process of vendor selection on the basis of the material required and workout to identify the best vendor suitable on the basis of his experience and capability keeping in mind the price he is offering.
2. Failing to build a healthy relationship with the suppliers: Without regular communications with the suppliers, you may miss out on savings, new supplier programs, opportunities for innovation and more. Your suppliers can offer new ideas or can let you know of helpful products in development that could benefit your work.
3. Not paying heed to advices from various sources: One of the most common mistakes made in service industry is avoiding/disregarding advises from sources including suppliers while procuring specific goods and services. Advises from sources involved in the buying process must be heard from and considered wherever there are opportunities to minimise the cost and increase the revenues by gaining maximum output from an investment.
4. Impulse buying/making snap decisions: We are in the industry where the chances of emergency purchases are very high. Sometimes professionals make a purchase without considering if there is any strategic alignment involved. The effects of lack of prior planning will crop up post procurement. Though these snap decisions may seem good at the time, they end up eating up the budget or affecting the workflow. In a challenging time, when industry is demanding business acumen from the managers, we should plan our ordering keeping in mind the occupancy and events happening in the hotel. We can maintain the optimum inventory level to balance the storage cost and transit cost if things are pre-planned and not rushed into.
5. Exceeding budget: Going beyond the set budget by department or work function can happen. It may be from spending too much at the start of the budget year or by not managing overall costs as the year progresses. Many times it has been observed that organisations who do not work towards identifying their requirement in consideration of its final output which provides it with the revenue, end up spending more than it has budgeted for. Also, considering current times the way transactions are carried out in haste, getting into a ‘accidental buying’ situation where we end-up buying wrong product/services, in wrong quantity at wrong time and wrong price is quite common.
6. Giving upgradation and technology a miss: Some professionals may not use e-procurement technology to its fullest capacity or potential. They may use an online catalog to search for the needed items and an online shopping cart to create their requisitions, but there is much more that can likely be done with your procurement system.
There can be a lot of technological advances, but the daily demands of work can prevent even the most well-intentioned procurement professional from checking with suppliers on opportunities for product innovation.
7. Incomplete terms and condition: In a day to day ordering, sometime Procurement Manager has to overlook the terms and conditions which later on can dent the profitability of the hotel like liquidity damages, extended warranty, in-transit insurance etc. Procurement Manager should always take cares of all the aspect and keep the terms and conditions clear and transparent for the win-win situation for both the parties, because buyer will ultimately receive exactly the same services/goods which they have defined as terms and conditions.
8. Accurately describing the scope of work: In the hospitality sector, we need to deals with the lots of different types of material from vegetable to the purchase of equipment like boiler, chiller etc., defining the scope of work clearly become utmost part of the contract to avoid the disputes in the execution of the contract. It also helps in better coordination between buyer and the sellers.
9. Looping end user: It is always better to loop end user in negotiation and defining the scope and specification of goods and services, because ultimate end user has to satisfy with the goods and services provided by the vendor.
10. Being inflexible: Always have an alternative plan in place in the event of something goes south. Suppose the ordered items aren’t ready by the given date or when you need them or arrive damaged, you should be assured and find other means of obtaining the requirements to meet your own production deadlines.