Leveraging Procurement Expertise to Drive Successful Lodging Operations
By Dennis M. Baker President and Chief Executive Officer, Avendra, LLC | October 28, 2008
Partnering with companies in order to maximize various business processes is a topic top of mind across many industries. For years it has been done successfully with payroll operations (think ADP), various technology providers (EDS, IBM) and even more recently with human resource operations (Hewitt). Now, the concept of outsourcing various procurement functions is gaining momentum in a variety of hospitality-centric industries, like lodging, cruise, golf and gaming.
What exactly is a procurement service provider? There are a variety of descriptions that these organizations take on - procurement service provider (PSP), group purchasing organization (GPO), purchasing consortiums - and so on. While their products and services vary tremendously - a fundamental goal of these organizations is to enable more efficient and informed supply chain management and purchasing behavior for its aggregate customer base.
Often one assumes that the sole motivation to seek out a partner for procurement is to reduce costs. However, a report issued by Accenture (Executive Insights Into the Growing Use of Procurement Outsourcing, 2003) reveals that reduced costs are not the number one reason for outsourcing procurement - rather it is the ability to free up internal resources to focus on areas of more strategic importance to the business. By outsourcing parts of the procurement process, a company is left with more time, and more resources, to focus on other critical areas of its business.
Why partner on procurement?
For many years manufacturers such as car companies, etc. have been outsourcing areas of procurement; however, more recently outsourced procurement has seen significant growth in service related industries. Solutions have been created which allow for the outsourcing of the supply chain management, the contracting process, the quality assurance function, etc, but still provide for significant, critical decision making to remain squarely in the hands of the customer. Additionally, as service related industries have grown, so have competition and operational complexities increased. The need to focus on how to best deliver differentiated value has prompted many companies to outsource various areas of procurement in order to allow greater focus on other strategic operations as well as take advantage of economic benefits and breadth of expertise delivered through an aggregated procurement approach
What to look for when considering a procurement partner