Foodservice India’s Nivedita Jayaram Pawar speaks to three industry veterans on the various facets of purchase and procurement function, and on the challenges and opportunities for procurement managers.
BERNARD FERNANDES Procurement Manager, Sofitel Mumbai BKC
Current challenges of procurement: The main challenge lies in ‘purchasing the right product, at the right price, at the right time’. The hotel purchasing function supports virtually every department within the property – whether purchasing chemicals for housekeeping or stewarding, office supplies for marketing, computer supplies for accounting, or food and beverage products sourced both locally and from overseas for the restaurant outlets.
Challenges foreseen in 2017: The biggest hurdle faced by procurement managers will be to understand the political scenario and what impact it can cause during a political unrest, especially if it entails procuring goods from another country.
Top trends in procurement: While there are several softwares to assist the procurement process, one of the most popular is Market Boomer. Today’s Purchase Manager needs to be well-versed with a range of supply management software, including database management, financial analysis, inventory, management, point of sale, procurement and project management programmes, as well as common office software. Procurement leaders will need to have a two dimensional approach in the future. Not only will they need to be analysers who know what’s happening in the places where they work, but they will also need to be able to delve around and bring issues to the fore in a business. In the times ahead, we will not need buyers; we will need people who understand markets and act according to the changing demographics.
Safeguards to changing consumer preferences: A procurement manager needs to know his job well. Not only does he need to know the sources for products but also the alternatives. Intelligent managers are well versed in cost breakdown negotiation techniques and cost analysis and this is what managers should do to grow in their jobs.
Dealing with volatile supply chain: As of today, procurement managers are dedicating endless hours to studying sales records, evaluating inventory levels, projecting demand, researching foreign and domestic suppliers, staying abreast of fi nancial and political changes that could affect the supply of, and demand for, materials. Since managers have little control over the unpredictable trends, the best they can do is use the available data and plan their inventory supply accordingly.
Policies affecting procurement managers: Today hoteliers are able to get duty free wines and products on EPCG (Export Promotion of Capital Goods) license. In fact, GST is going to be the next game changer in the industry, which is going to make systems less complicated and easy to understand.
Challenges procurement managers face: The difficulty in maintaining a stable supply, aligning procurement strategy across multiple geographical locations, reducing costs and achieving savings are some of the major challenges we face. However,the biggest challenge is searching for the right material at the right price point. The sheer size of information we have to sift through to reach the right company, brand and products is quite complex. Recruiting, retaining, and training talent is also important.
Likely challenges in 2017: Inadequate supply of quality talent and increased competition for talent within the sector and from competing service sectors has made attrition a significant issue. Managing costs better s on the top of the agenda for operational effectiveness, reducing energy consumption, investing in technology to reduce costs. Uncertain international relations & diplomacy, fluctuating international currency, sourcing and consistent supply of sustainable produces (eg, perishables, seafood, cereals and pulses etc.) will continue to hound purchase managers in 2017.
Top trends in purchasing: E-procurement systems is one of the top trends that allow suppliers and procurement professionals to be in contact and share and manage information such as purchase orders, catalogues and contracts online. This streamlines the entire global procurement process, and use records to quickly and easily hold suppliers accountable, gain accurate supplier information, and better plan global transactions. With this trend comes the rise of the Cloud. Procurement has had a great opportunity to leverage Cloud software in a number of ways, including as part of supplier collaboration. The Cloud allows ordering to be streamlined, increase visibility across the supply chain and allows for changes to be made more easily, even when goods are in transit.
Dealing with complex food regulations: Food represents one of the largest globally traded commodities and can pose a major safety risk if not controlled. With globalization, the supply chain must be carefully monitored to ensure imports meet food safety regulations and are free from tampering while adopting industry leading best practices. Food safety regulations are increasingly outcome-based and transparent. Governments are also seeking to harmonize their food safety regulations across borders to keep the flow of goods moving seamlessly through the supply chain.
Safeguards to changing consumer preferences: Yes, food preference of consumers has become very much unpredictable and as a hotel we need to fulfil the requirements as far as possible. However the hotel also needs to ensure that quality, profitability, Government rules & regulations are also maintained/ adhered to. Like, for example, with the ban on certain products, a hotel cannot take risks to serve/ provide such products as it will attract media attention and negative publicity. Purchase Managers should be equipped with market knowledge and vendor data base so as to be abreast with the latest trends and market offerings by different vendors.
Dealing with volatile supply chain: Keeping multiple contract suppliers is one way, where in supply of required quantities can be ensured to the hotel. Technological innovation is making rapid progress and one such advantage is in the form of IQF vegetables & fruits. Manufacturers can process and store the items when there is plenty of produce and the same can be used during times of scarcity. The pricing offered by companies is also very competitive and gives stability to the food cost as the prices can be fi xed for a year.
Challenges of procurement: The main challenge we face is with respect to experimentation with newer cuisines or varieties of cocktails as importers do not necessarily import produce required for the same. Since we use a lot of fresh produce, we prefer to go local. This also helps us support domestic businesses. But the real problem arises in case of cuisines not native to India. Vegetables, herbs and other ingredients used in certain cuisines cannot be imported as they cannot be preserved. In case they can be, clearing at the docks itself takes one to two weeks (depending on the cuisine) – making it expensive as well as unfeasible.
Challenges foreseen in 2017: The biggest challenge we foresee is the entry of international cuisines or their authentic treatment thereon. It becomes too expensive a proposition to explore a new cuisine as our palate is still evolving, which is why a lot of international restaurants or cuisines haven’t come to India due to the cost in maintaining consistency or interest at high price points.
Top trends in the market: I perceive more cocktail bars will spring up and food will go more regional. Food technology is also something I truly believe is slated to grow and revolutionise the way we see, consume and communicate about food. Safeguards to changing consumer preferences We factor in a menu change every three months and have a Creative Cocktail and Food Lab that keeps a keen eye on food trends across India and the world and constantly strives to innovate.
Dealing with volatile supply chain: We maintain a healthy ratio of local produce versus preserved ones. We also have a roster of procurement managers and suppliers who can help us with canned or frozen options in case of a lack of supply.
Government policies affecting procurement: The biggest challenge is the regulation around alcohol procurement, which dates back to 1961 and hasn’t changed since! We are still using the same laws despite such high growth in demand! In fact, imported alcohol is expensive, time-consuming and confusing to import. For example, to import a wine in our country, the most basic requirement is to register a label and then its homologation, which in itself is a very long process.