Role of Procurement in a Hotel Operation
Unseen Hand in Optimizing Profitability and Company Value
By S. Lakshmi Narasimhan Founder, Ignite Insight LLC | September 22, 2013
The role of procurement in a hotel operation is not immediately apparent. However, procurement costs are a core part of the profitability performance of a hotel business. The sustained availability of products and services used in generation of revenue streams as well as for internal consumption keeps the business running like a well-oiled machine. Moreover, such availability at the best quality for the least cost is what businesses strive for.
Procurement costs are different for an operating and opening hotel. However, before we look at that, it is important to understand what actually constitutes procurement and what costs are involved in that.
Procurement and Purchasing
To begin with, we need to understand clearly the difference between procurement and purchasing. Procurement as a function is vastly bigger in scope than the traditional purchasing function.
Purchasing refers to the process of ordering and receiving goods and services. It is a part of the bigger procurement process. Generally, purchasing refers to the process involved in ordering goods such as request, approval and creation of a purchase order record and ultimately the receipt of goods.
On the other hand, "Procurement" is the function that describes the activities and processes to acquire goods and services. Key to this and clearly different from "purchasing", procurement involves amongst others:
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