Hotel owners and managers may be missing a cost savings opportunity by not taking a closer look at the supplies they are selecting for their properties—such as cleaning supplies, paper goods, soaps, and other items. However, rather than looking for less costly items to generate savings, instead, hoteliers should look for savings in the systems and procedures used to order these supplies. The costs related to ordering can be more expensive than many owners and managers realize. To identify these costs and then help reduce them, it is necessary for hoteliers to conduct a procurement audit.
The goal of any procurement audit is to look at the big picture—everything from what products are being selected to how they are being selected, and even how a property is billed. Saving are possible at every step of the way. Using cleaning supplies as an example—since they are a significant expenditure for hotel and lodging properties—some of the key elements of a product audit should include the following:
Inventory. Take stock of all the products now being purchased for the property or properties. If at all possible, all locations should be using the same cleaning products. This often means owners/managers can make large, bulk orders, which invariably produces savings.
Look for redundancies. Are two or three different types of cleaners being used, all of which can be used for the same or similar purpose? Redundancies cost money, take up space, require added training, and can actually be a safety hazard.
Ask why these cleaning products were selected. Many times, a cleaning product is purchased just because it has always been purchased. Distributors that have access to online “dashboard” systems allow users to evaluate products, compare prices, determine which are green, and provide other information. Often hoteliers can find savings either on the sticker price or by indicating products that perform better, have higher dilution ratios (more water/less cleaning solution), etc., which all help save money.
Consider sending out a request for proposal. Send RFPs for supplies to a number of different distributors. Look for multi-location, independent distributors that can provide products for several different locations in the country. Have them bid on a hotel’s or hotels’ cleaning product needs. Competitive bidding often results in more competitive pricing.
Often after an RFP has been submitted, the number of distributors a hotel is working with will go from many to just a few. This has a number of benefits, one of which applies to invoicing. Whether or not it costs $25 or more to process one invoice, it certainly takes time—and time is money. The fewer invoices received for cleaning product purchases, the less time and money needed to process them.
Determine how many days of product inventory are on hand. While, of course, hotel management never wants to run out of cleaning products, that does not mean they need to order a year’s supply with one purchase. While there may be cost savings, also consider cash flow issues. Too much money sitting in the janitorial closet is simply not the best way to manage cash flow. An astute distributor, especially one using one of the dashboard systems mentioned earlier, can help lodging owners and managers make purchases large enough to cover current needs but not so large that it creates a financial strain.
There are more steps to a procurement audit. However, the ones discussed here are some of the most important. But there is one more key component, and that is to view purchasing and procurement as a journey. It is very easy to purchase the same products over and over again. But doing so eliminates the possibility of selecting more cost-effective products, those that improve cleaning efficiencies, or those that are healthier and safer. A product audit should be conducted every two or three years. It’s just good business.
About the Author
Michael Wilson is vice president of marketing for AFFLINK, a supply chain optimization, company.
