Ardent Partners Research Report - BirchStreet Systems€¦ · strategies, thanks in large part to...

Andrew Bartolini, Founder and Chief Research Officer Matthew York, Senior Research Analyst Ardent Partners October 2019

Procurement Transformation: Best-in-Class Strategies

for the Hospitality Industry

Underwritten by:

http://www.ardentpartners.com

© 2015 Ardent Partners Ltd.

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© 2019 Ardent Partners Ltd


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Procurement Transformation: Best-in-

Class Strategies for the Hospitality

Industry

REPORT SPONSORSHIP

The views and opinions in this report represent those of Ardent Partners at the time of

publication. Sponsoring companies have had no measurable influence on the content and

research in this report. The contents of this research report are the exclusive property of

Ardent Partners. Please direct any comments or questions regarding our research

sponsorship policy to Ardent’s Chief Research Officer, Andrew Bartolini, at

[email protected] and/or 617.752.1620.

Sponsor:

About BirchStreet Systems LLC

BirchStreet Systems LLC headquartered in Newport Beach, California, with offices in India,

Mexico, Singapore, China and the UK is the global leader in cloud-based Procure-to-Pay

automation platform for the hospitality industry. BirchStreet Procure-to-Pay software

improves profitability and compliance by automating business processes covering e-

Procurement, AP automation, invoice management, payments, inventory control, recipe

management, capital projects, supplier management, sourcing and contract management.

Thousands of businesses in over 100 countries currently subscribe to BirchStreet to connect

and do business with a network of more than 400,000 suppliers, establishing BirchStreet as a

leader in the Hospitality industry.

For more information, events and webinars, or to request a personal demo, please email

[email protected] or visit www.birchstreetsystems.com.

mailto:[email protected]


http://www.birchstreetsystems.com/


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Best-in-Class Strategies for the Hospitality Industry

In the hospitality industry, a strong

performing procurement operation can be

what separates the high rollers from the low-

stakes players. Best-in-Class procurement

teams in this segment have tried and true

strategies, thanks in large part to modern procure-to-pay (P2P) platforms, that

bridge the gap between strategic sourcing and operational procurement. As

with other teams in other industries, specific Best-in-Class advantages (from

business agility and operational efficiency to P2P automation and intelligence-

led insights, as well as integrated and optimized inventory management) are

critical for supply management success within the hospitality space. This report

will illustrate the value proposition for modern and increasingly intelligent P2P

platforms for all stakeholders in the hospitality industry. It also offers best

practice examples and recommendations on how to leverage the right systems

and strategies to drive a successful procurement transformation in the sector.

Well-Tuned Procurement Teams Can and Do Win Big

The hospitality industry is filled with many large, independently-owned and/or operated

businesses that place large amounts of enterprise spend on food and beverages – often from

a variety of vendors in order to cater to a variety of customers. These hotel and restaurant

chains, resorts, casinos, and bars can frequently derive greater value from their supply

management platforms than businesses in other industries because of the nature of their

industry – one that places customer experience (“CX”) and, more specifically, customer

delight, at the center of its business model.

In the hospitality industry, there is a direct link between CX and enterprise performance. For

example, businesses like bars, nightclubs, resorts, and restaurants rely on selling premium

and often highly-perishable items, like top-shelf liquor, choice cuts of meat, and fresh

seafood, upon request in order to turn profit. That said, there are also steep opportunity costs

for running out of top-selling products that have wide profit margins. Ultimately, profitability


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and success in the hospitality industry depend on the ability to reliably source and procure

goods that meet the immediate and ever-changing needs of their customers.

But, customers are not the only stakeholders whose palettes can change on a whim:

restaurateurs and chefs often change their menus depending on the available ingredients,

season, occasion, week, or even the day of the week. Indeed, in an environment where

culinary creativity and freedom and the customer experience are known to drive profit,

procurement teams in hospitality need to give greater deference to stakeholder

requirements than in many other industries while still maintaining processes and controls

that drive value.

In order for procurement teams to succeed in the hospitality industry, they need to “earn a

seat at the table” by establishing a dialogue and building partnerships with key stakeholders,

being more collaborative than prescriptive, and influencing without authority. They also must

have effective sourcing, P2P, inventory management, and capital projects management

processes and systems in place to manage their direct spend, build flexible and resilient

supply chains, have clear visibility into inventory, and be able to manage long-term CX

initiatives to continuously delight customers.

The Four Pillars of Procurement Transformation in the Hospitality Industry

The success of any business in the hospitality industry depends on several key variables:

having the “right” product, market, location, leadership, and staff. But, none of these will

matter if the business’s procurement operation is not grounded in the four pillars of

procurement — sourcing, P2P, inventory management, and capital projects management.

Each of these foundational areas, when standardized, automated, and linked to each other,

anchors the business on terra firma, enabling business owners and managers to position

themselves and their staff – from award-winning master chefs to line cooks – to be creative,

resilient, reputable, and most importantly, profitable. Without them, enterprises increase the

risk of suffering a business disruption, like an inventory shortage or a quality control failure.

Strategic Sourcing

The “upstream” process of analyzing spend; leveraging that insight to conduct sourcing

events, rate supplier bids, and award contracts; incorporating and codifying that information

into supplier contracts; and using all of the resultant data to evaluate supplier performance

and manage risk is the essence of an integrated strategic sourcing workflow. Restaurant,

resort, hotel, and casino brands generally rely on group purchasing organizations (GPOs) to


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conduct the full strategic sourcing spectrum. For these procurement departments, strategic

sourcing is less about standardizing, automating, and linking processes as it is about ensuring

that their GPO commits to and follows strategic sourcing principles, and can reliably provide

them with sufficient quantities of high-quality, valuable goods and services to meet their

customers’ evolving demands and turn handsome profits.

But for smaller, independent businesses in the hospitality industry, automating,

standardizing, and linking strategic sourcing processes is a bedrock business practice and

almost a prerequisite to enduring procurement transformation. Best-in-Class procurement

organizations tend to automate, standardize, and link their processes more frequently than

others. For example, Best-in-Class procurement teams are more than 40% more likely to be

able to leverage their visibility into spend to inform sourcing decisions than their peers. They

also report greater visibility into their sourcing, supplier management, and risk management

processes. And, as a corollary, they reap superior rewards in terms of greater savings, higher

contract compliance rates, and reduced supplier or supply risk (see Table 1, next page).

Procure-to-Pay

In the high-stakes game of procurement, P2P is what

frequently separates the top performers from the

rest of the crowd, especially in the hospitality/food

and beverage industry where transaction rates can

differ wildly. Procure-to-Pay is where the savings

identified during the analysis of prior-year spend,

secured in a supplier agreement, and codified in a contract can be realized and returned to

the enterprise via higher volumes of on-contract spend, lower off-contract (“maverick”)

spend, and lower invoice processing costs. There are two sides to this casino chip: P2P process

and P2P technology. Both are invaluable to a high-performing procurement operation.

At the process level, buyers, suppliers, and accounts payable (AP) teams need to standardize

procurement and payment processes and integrate them to form a holistic workflow – from

purchase to invoice and finally to payment. They also need to build healthy, enduring

relationships with each other in order to understand how they can best serve each other at

each stage of the process – particularly for last-minute purchases to accommodate a sudden

menu change, additional guests, or the unique wishes of a VIP guest. Surely, there are ways

that suppliers can improve the buying experience, while there are ways that procurement


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can improve the quality and precision of purchase order (POs) and invoice processing, which

could lead to reduced invoice processing costs.

From a technology perspective, best practices are for procurement teams to adopt digitized,

automated procurement (eProcurement) platforms that connect buyers and suppliers; and

that integrate purchasing activity directly to the AP department and their associated invoicing

and payment processes. They ought to be used to drive supplier enablement (i.e., to load

suppliers’ company, product, pricing, and payment information onto the platform) to

facilitate seamless transactions, payment remittance, auditing, and performance assessment.

And their use ought to become standard (and mandated, if necessary) in order to move as

much spend as possible onto the platform and into an official process workflow, because the

value of a business tool is only realized when it is used.

When adopted, integrated, and mandated, P2P processes and platforms can drive efficiencies

(like three-way invoice matching), reduce costs, plug process gaps to limit savings leakage

and ultimately preserve identified savings. In a recent Ardent Partners survey of 341 Chief

Procurement Officers (“CPOs”) and other procurement leaders, 67% of Best-in-Class

procurement teams reportedly deploy eProcurement tools. This same cohort reported

performance levels superior to All Other procurement teams (see Table 1) – from spend

under management percentages and actual savings, to contract compliance rates and

enabled suppliers. Another recent Ardent Partners survey of 200 AP and finance leaders

found that Best-in-Class AP teams reported invoice processing costs of just $2.52 compared

to $14.38 for All Other AP/finance teams.

Table 1: The Best-in-Class Procurement Framework

© Ardent Partners


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Inventory Management

It ought to go without saying that a business cannot sell what it does not have. And, for

businesses in the hospitality industry that turn profits based on serving premium foods and

beverages, running out of precious inventory or having it spoil on the shelf can lead to

significant losses, including an immediate loss of revenue and the quick erosion of customer

satisfaction (which can have a lasting impact on repeat business). Worse, still, would be to

serve spoiled or expired products, which could have significant health and safety

consequences, and could lead to lost business, fines, lawsuits, and the eventual failure of a

business. Clearly, there are significant inventory costs and supply risks that businesses in the

hospitality and service industry must avoid or manage. But, according to Ardent Partners’

research, just 53% of Best-in-Class sourcing and procurement teams report having visibility

into supplier performance and supply risk issues, to say nothing of their own internal

(inventory) risks.

As a result, procurement teams operating in the hospitality industry need to have an

inventory management system that provides them with visibility into food and beverage

inventories and supplier capacity, and that links to eProcurement platforms for fast, easy, and

even automated replenishment. Procurement teams also need a system that enables users

to communicate and collaborate with suppliers and other franchises to fill inventory gaps in

short order. Finally, procurement and AP teams need inventory management programs that

connect to requisition, PO, and payment platforms to facilitate fast and seamless three-way

coordination between procurement, the supplier/distributor, and AP.

Capital Project Management

The fourth and final pillar, capital project

management, concerns not only large hotel, resort,

and restaurant chains, but also smaller,

independently-owned and operated businesses

trying to modernize and improve their

infrastructure. Capital project management involves

evaluating and managing the performance of contractors and other vendors to manage

projects and provide goods and onsite services. Procurement teams need to source from the

right contractors, maintain sufficient project oversight, and track milestones correctly to

ensure that projects like remodeling, renovations, additions, or system upgrades are done on

time, on budget, and to specification.


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Leveraging standard systems across the enterprise can ensure the development of best

practices for project and budget management across a portfolio of distinct properties and

operations. After all, there is value in being able to leverage the experience and collective

knowledge of other vendors by the teams that have previously managed similar projects

there. Franchises and branches that can leverage established enterprise-wide relationships

and lessons learned are far better off than starting from scratch and reinventing the wheel

with each new project.

Case in Point:

Bryan Edwards is the vice president of strategic sourcing and supply chain for North America

at Two Roads Hospitality, one of the largest hospitality management companies in the world.

Bryan’s team oversees a centralized sourcing model that enables the company’s client

portfolio of more than 80 hotels, restaurants, and bars worldwide to procure local and

authentic food and beverages and deliver a unique customer experience. This means that

hoteliers, chefs, and bartenders often need to make last-minute, off-contract purchases to

accommodate guest wishes or support menu changes. Bryan and his team implemented

BirchStreet’s Procure-to-Pay solution to help them drive transparency into their supplier base,

automate and simplify the sourcing and procurement processes, reduce the number of

suppliers and contracts, and ultimately add more value to their clients. “I think the ability to

be non-prescriptive but still add value is a unique capability enabled by our state-of-the art

technology system,” he said, adding that “What we specialize in is the idea of creating a

supply chain that’s wide enough to be innovative – that allows innovation, ‘chalk-board

menus,’ that ‘just-in-time experience’ for VIPs and other folks – without interrupting

operations and/or handcuffing a chef or operator."

Strategies for Success

Procurement transformation does not happen in a vacuum, nor does it happen overnight. It

concerns multiple stakeholders inside of the organization (procurement, AP/Finance, IT), as

well as the supplier base. Chief Procurement Officers and procurement teams in the

hospitality industry must manage multiple areas successfully in order to accomplish a

comprehensive and impactful procurement transformation, including strategic sourcing, P2P,

inventory management, and capital project management. With so many chips on the table,

delivering a procurement transformation in the hospitality industry may seem a long shot,

but with the right focus, resources, and strategies, the payouts can be great. To increase the

odds of success, Ardent Partners recommends the following strategies and steps for CPOs


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and other procurement leaders to take as they commence a procurement transformation

initiative.

Collaborate early and often with key stakeholders, including AP/Finance, IT,

business leaders, and even suppliers when planning and designing the

transformation and desired future state; actively seek their buy-in.

Ensure that contracted GPOs are providing the reliability, pricing, and quality

needed to stand out and deliver in the competitive marketplace; conduct regular

price and compliance audits to ensure the GPOs’ interests are properly aligned.

Standardize and link key sourcing, P2P, and inventory control processes, to create

a seamless and holistic workflow.

Migrate processes and systems to the cloud for turn-key, on-demand, and mobile-

first / mobile-ready business tools.

Prioritize P2P platforms that offer native eProcurement, ePayables (AP

automation), and inventory control / management applications.

Leverage existing vendor relationships that exist across the larger enterprise for a

more efficient and expedient capital project management experience.

Conclusion

In the hospitality industry, the primary objective is to deliver memorable experiences that

leave customers happy, fulfilled, and eager for more. The stakes are high because bad

customer experiences can spread like wildfire and quickly erode a brand’s reputation, placing

pressure on profitability. While procurement departments in many other industries are

viewed as operating from the back lines of the business, nothing could be further from the

truth in hospitality. Leading hospitality CPOs know that the proper blend of talented people,

efficient processes, and enabling technology is needed for their procurement departments to

deliver full enterprise value and deliver top-notch service. And, leveraging this blend across

each of the key areas – sourcing, P2P, inventory management, and capital projects – is

fundamental to both short-term and long-term success.


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Appendix

About The Authors

Andrew Bartolini, Founder and Chief Research Officer, Ardent Partners

Andrew Bartolini is a globally-recognized expert in accounts payable,

sourcing, procurement, and supply management. Andrew focuses his

research and efforts on helping enterprises develop and execute

strategies to achieve operational excellence within their finance and

procurement departments. Andrew is also the publisher of CPO Rising, the

news and research site for Chief Procurement Officers and other

procurement leaders (www.cporising.com).

Advisor to corporate executives and leading solution providers alike, Andrew is a sought-after

presenter, having lectured and presented more than 350 times in nine different countries.

Over the past decade, Andrew has benchmarked thousands of enterprises across all facets of

their accounts payable, sourcing, procurement, and supply management operations and his

research is currently part of the Supply Chain/Management curriculum at several US

universities. He actively covers the technology marketplace as well as trends in sourcing,

procurement, supply management, and accounts payable and has been published or quoted

in leading business publications including The Wall Street Journal, Business Week, Investor’s

Business Daily, Forbes, and Fortune, as well as the major trade publications focused on

accounts payable and supply management.

Prior to becoming an industry analyst, Andrew developed, packaged, deployed, and used

supply management solutions on behalf of enterprises in the Global 2000 while working for

Ariba and Commerce One. Additionally, his experience in strategic sourcing (where he

managed sourcing projects totaling more than $500 million in aggregate client spend),

business process transformation, and software implementation provides a “real-world”

context for his research and writing.

Andrew has been named a “Pro to Know” by Supply and Demand Chain Executive three times

and holds a B.A. in Economics from The College of the Holy Cross and an M.B.A in Finance

from Indiana University. He welcomes your comments at [email protected] or

617.752.1620.

http://www.cporising.com/



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Matthew York, Senior Research Analyst, Ardent Partners

Matthew York is a Senior Research Analyst at Ardent Partners who for more than a

decade has been fascinated by emerging technologies like artificial intelligence,

Blockchain, and connected devices, and how they can enrich business operations.

At Ardent Partners, Matt researches, analyzes, and writes about the intersection of

people, processes, strategies, and technologies in supply management and how

they are changing the business landscape of tomorrow. He has been lead author on

data-driven, thought leadership reports ranging from advanced analytics to

contract management to strategic sourcing to supply risk management. Matt has

been named a “Pro to Know” by Supply and Demand Chain Executive magazine and is a sought-after

speaker. He earned a B.A. in Political Science/International Relations from Stonehill College and an

M.A. in Political Science/International Politics from the University of New Hampshire. Matt can be

reached at [email protected].

About Ardent Partners

Ardent Partners is a Boston-based research and advisory firm focused on defining and

advancing the supply management strategies, processes, and technologies that drive

business value and accelerate organizational transformation within the enterprise. Ardent

also publishes the CPO Rising and Payables Place websites. It also hosts the prestigious annual

CPO Rising Summit. Register for exclusive access to Ardent Partners research and events at

ardentpartners.com/newsletter-registration/.

Industry Standard “Fine Print:” The information contained herein has been obtained from sources believed to be reliable. Ardent Partners,

Ltd. disclaims all warranties as to the accuracy, completeness, or adequacy of such information. Ardent Partners, Ltd. shall have no liability

for errors, omissions, or inadequacies in the information contained herein or for interpretations thereof. The contents expressed herein

represent Ardent Partners’ best analysis at the time and are subject to change without notice.

© 2019 Ardent Partners, Ltd. All rights reserved. Reproduction and distribution of this publication in any form without prior written

permission is forbidden. Solution providers and consultancies should take special note that Ardent Partners reserves the right to seek legal

remedies including injunctions, impoundment, destruction, damages, and fees for any copyright infringement (which includes but is not

limited to usage of any Ardent Partners content in company collateral, presentations, and websites) in accordance with the laws of the

Commonwealth of Massachusetts and the United States.


http://cporising.com/

http://payablesplace.com/

http://events.cporising.com/

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