<<Author>>
<<Date>>
The changing face of global procurement
The nature of global business is undergoing rapid change and companies are being forced to move away from traditional thinking to keep their business robust and sustainable (Handfield and Nicholas, 2007). Efficient purchasing methods not only enhance the efficiency of overall business operations and profitability but also help in maintaining a competitive stance in the market (Tate, 2013).
Choosing the right suppliers
Supplier selection criteria should be linked to the overall nature of the business and factors like trust, financial prowess, adherence to quality, reliability, technology and logistics expertise (Cox, 1999). Other criteria include certifications like ISO, references, innovation capabilities and so on (Harps, 2000).
Procurement management and planning for the hospitality industry is unique in its own way since it made up of a large number of small activities (Feinstein and Stefanelli, 2002). It is important to define purchase objectives specific to the needs of the organization – its philosophy, vision and the value that it wants to create. Globalisation has brought about the importance of sustainable operations and bodies like the EU have formulated many policies to legislate activities in support of the environment (Chung, Chao and Lou, 2016). Efficient purchasing methods not only enhance the efficiency of overall business operations and profitability but also help in maintaining a competitive stance in the market (Tate, 2013).
Sofitel Supplier Selection Criteria
In the case of Sofitel, it is important to realize the goals and ambitions of the global chain before embarking on supplier selection. The chain of hotels operates in 5 continents and Sofitel Melbourne is located in a prime area, known for its luxurious ambience, sophistication and commitment to Arts, Social Accountability and the Environment.
The procurement function works globally across 19 countries and the model is based on the best cost integration and rationalization which helps the group deliver the benefits to its franchisees across the world.
We will consider the commodity group fresh fruits and vegetables. As part of its vision and goals, the hotel prides itself in its commitment to Corporate Social Responsibility. Delivering menus and other products sourced out of sustainable practices is a key focus area.
Suppliers are motivated to not only use environmentally friendly practices for the produce, but also use recycled pallets and non-disposable packaging. Sofitel services an elite customer base, which is sensitive to environment and health issues. Vendors therefore, should have a high sensitivity to sustainable practices.
They should ensure that their manufacturing operations follow green raw materials, use eco-friendly packaging, be energy and water efficient. Sofitel believes in being at the forefront of concepts like eco food and promotes responsible eating and health. The usage of food is optimized and there is only 30% wastage. It also has an objective of building 1000 urban vegetable gardens in the hotels by 2020.
Sofitel also believes in caring and respect for people – its Social Accountability Statement ensures that suppliers are committed to respect people and don’t infringe on their rights. It protects individual and cultural diversity and organizes many art related events.
They have partnered with Planet 21 to foster sustainable practices and earned ISO 14001 certification for environmental standards and eco-friendly methods in 7 key areas - health, nature, carbon, innovation, local, employment and dialogue, which are linked to their corporate objectives across 92 countries. Vendors are expected to deliver to Sofitel’s social objectives by ensuring the protection of labour rights and human issues, health and safety. Sofitel also supports vendors who source products locally to support local job creation in the markets they operate. This helps in building strong social and community relationships.
Sofitel prides itself to be a luxury destination and caters to the elite market segment. As per its policies, it supports responsible eating and prevention of diseases. Therefore Quality is one of the main criteria that a vendor must deliver. In the case of fruits and vegetables, typical factors include, size of the container, standardized size of fruit and vegetables, packaging, ease of storage, longevity, drained weight, type of processing, color, form, use of pesticides in agriculture process, preservatives used and so on (Feinstein and Stefanelli, 2002).
Suppliers need to be located in the heart of the country and/or city - to enhance delivery capabilities and efficiency. They must have global reach – to get access to high quality methods of farm produced fruits and vegetables. This will help Sofitel source unique fruits and vegetables around the year and add value to customer satisfaction.
Technological capability is a focus area in vendor selection. Ideally the vendor must be integrated with Sofitel IT systems. Vendor must install a version of Windows based Optima to help bring integration and efficiencies in ordering, monitoring quality, delivery, storage, returns, invoicing and other operations.
Risk management is another key criterion for Sofitel. Vendors must be able to deliver and adhere to timeliness and quality regardless of any unforeseen events in their business environment or their country.
Cost of procurement is an important factor. Sofitel aims to drive global procurement and cost efficiencies on a continual basis. Vendors must be able to showcase solutions that provide the best Total Cost of Ownership (TCO) and value to customers. Sofitel believes in maintaining high standards in terms of its sustainable operations, image and reputation. However, high quality usually means a high cost.
Vendors have to provide the optimal price and service so that Sofitel can deliver optimal value to customers. Vendors will need to optimize the as–purchased (AP) cost on a continual basis. They must be willing to offer volume discounts and cash discounts. Other factors to control cost involve odd-hour (night) deliveries.
Vendors must continually monitor supply and demand of raw materials to ensure the best AP price for Sofitel without compromising on quality. Delivery and Service level is an important criterion. The vendor must be able to deliver consistently and have a distribution and logistics system to cater to regular or urgent needs, like in the case of large events and gatherings.
The vendor must prove that they are financially stable and are able to work with the large volumes of purchases. Sofitel purchases goods in excess of $200 million every year. Vendors must show financial discipline, robust cash flow and not display any unethical behavior in financial transactions towards their supply chain partners or employees.
Sofitel believes in maintaining quality and its purchase of food results in a sustainable footprint. The vendor must also display a commitment towards just in time delivery and process to help Sofitel achieve this objective.
References
Chung. C., Chao. L. and Lou. S. (2016). The Establishment of a Green Supplier Selection and
Guidance Mechanism with the ANP and IPA. MDPI. Sustainability 2016, 8, 259;
doi: 10.3390.
Cox. A. (1999). Power, Value and SCM. Supply Chain Management: An International Journal. 4(4) 167-175.
Feinstein. A. and Stefanelli. J.M. (2012). Purchasing: selection and procurement for
the Hospitality industry. Hoboken, N.J.: John Wiley & Sons.
Handfield. R.B. and Nichols. E.L. (2007). Introduction to Supply Chain Management, Prentice
Hall, USA (1999).
Harps. L. H. (2000). The Haves and the Have Nots: Supply Chain Practices for the New
Millennium. Inbound Logistics Journal. 75-114.
Tate, W. (2013). The Definitive Guide to Supply Management and Procurement: Principles
and Strategies for Establishing Efficient, Effective, and Sustainable Supply
Management Operations. Pearson Education.
