In the Middle East the supplier base must consolidate and concentrate more on quality produce than competitive pricing, according to a group of experts speaking at the inaugural Hotel News ME Procurement Conference, held earlier today in the Grosvenor House Hotel in Dubai.
With 275,574 rooms under construction in the Middle East, according to STR Global, a panel of Bhanu Pratap Singh, Procurement Director at Atlantis The Palm, Asif Kayani, Director of Purchasing at Four Seasons Resort Dubai, and Joseph Ghosn, Area Procurement Director Middle East & Sub Saharan Africa at the Rezidor Hotel Group debated the potential impact on supply and demand for hotel equipment and furnishings. They also analysed the availability and pricing issues that could arise from any surge in demand.
Bhanu outlined the current supply chain market in the region, saying: “In Dubai we over 300 food and beverage suppliers but only 20% supply to most hotels. If we look at our supply for the next three years the objective is not just on price but sustainability. As we are expanding in UAE in the next few years, and in Saudi, Africa and Turkey, we need to identify the type of partners we have.”
Pratao told delegates: “Firstly, on a procurement side we have a simple commitment to buy for quality not price, secondly we buy at a competitive market price which impacts the EBITDA of the hotel. Thirdly, once we have the right product and the right price we need to ensure its efficiently managed – so the speed of delivery is very important.
Ghosn added: “We want the most suitable supplier and the most suitable products, and we are trying to limit the number of suppliers we use by removing 35% in the last few years and a further 30% going forward.”
Kayani agreed: “We are also trying to minimise the number of suppliers we use. When a new supplier comes to use we ensure they are approved and certified before we ask for a quotation; we won’t do business just on the price.”
Bhanu told delegates that it was the responsibility of procurement managers to ensure that returns on investment correlate with what is purchased. “This is expected out of your function and we need to learn to accept this.
“Investors demand returns and procurement plays an important role in addressing that, this is the basic function of procurement. We must realign the function of procurement and investment partners for trust and a relationship, then your partner becomes a solution provider and offers new opportunities.”
According to the panel, a trend not explored in the past is technology, which directly affects the speed of delivery. Today, procurement must be a technically driven function, with 95% of processes now fully automated.
Kayani said: “Pre 1998 price didn’t matter, and today it’s a combination of price and quality but post 2020 the question will be how we maintain that level of service. The solution is centralising and streamlining processes and suppliers. With a lot of new vendors coming ahead of 2020, it is essential for us to have a central procurement function, which will ultimately mean less local functions for procurement managers.”