Insight series: Online procurement is the order of the day

19 July 2013
Insight series: Online procurement is the order of the day

The take-up of online procurement systems has been relatively slow in the hospitality sector, but the tide is slowly turning as more and more operators realise the huge benefits this software can provide. Elly Earls finds out more

Most of us would be lost without the internet. From keeping up to date with friends via social media to ordering groceries through e-commerce, online technology infiltrates a large part of our lives.

It's playing a growing role in business, too, with most hospitality operators now comfortable using smartphones and tablets to market their businesses on social media and Epos systems to manage the point of sale.

However, take-up of online tools to optimise the buying process in the hospitality sector has been comparatively slow. Research conducted by Caterer and Hotelkeeper in association with on-demand supply chain management provider iTradeNetwork shows that in the last quarter of 2012, 71% of operators had installed Epos systems, but only about 14% of food and 16% of drink orders were being conducted online, with 78% of food and 67% of drink orders still given over the phone.

But habits are changing, says Alex Walters, iTradeNetwork's European sales director for hospitality. "Operators now really believe it's something that can help them transform their businesses by driving efficiency and reducing costs and wastage."

But take-up in the hospitality sector has lagged other industries. "The take-up of online purchasing systems has certainly been slow in the hospitality industry," says Kate Windebank, systems operations manager at e-procurement solutions provider Epsys. "A lot of that is down to the perception that a large investment is required or a massive change needs to be managed into the business."

That said, the old barriers to adopting online systems are now pretty much non-existent as people become comfortable with using e-commerce. "It's not such a big culture change any more," says Windebank. "As more operators shift to e-procurement and online systems, people are thinking it's not such a big leap."

The survey carried out with iTradeNetwork supports this view, finding that 58% of operators that did not already use online ordering said they would use it if they were offered it.

So, what are the key advantages of online purchasing software for hospitality operators and how can these systems improve the way these businesses work?

At head office level, visibility and control can be boosted significantly by moving to online procurement. "You get instant visibility of what the units are doing," says Walters.

"It gives managers a snapshot of what their units have ordered, a sort of helicopter view, very quickly."

The ability to stop staff ordering what they're not supposed to is another plus, and this has brought major benefits for snooker and pool hall chain Riley's. It had been having problems with unaccountable stock levels, stock wastage and mis-ordering from some areas of the business, leading to inefficiency and spiralling costs. Deploying iTradeNetwork's online purchasing system saved Riley's a six-figure sum within three months.

"The Multiple Operator Portal gives us a fantastic opportunity to ensure our clubs only order head office-approved products," says Riley's purchasing controller Valerie Currie. "The platform helps us in the purchasing of all our products, to maintain stock at the right levels and to know exactly what, when and the value of purchases across the business."

Using an online procurement system is much more convenient than having to order over the phone at set times of the day, which can make a huge difference in the hospitality sector. In iTradeNetwork's survey, 48% of operators said convenience was the most important reason for ordering online, a much higher proportion than the 20% that had implemented online purchasing systems mainly for better purchasing information and control.

Takes strain away Windebank adds: "We have several operators that send their orders maybe at 11pm because they've got a busy day of functions the next day. Online purchasing takes that strain away and means they can place their orders whenever they want and wherever they are."

For Pizza Express, convenience was a key reason for moving to iTradeNetwork's Multiple Operator Portal. Before it adopted the system, restaurant managers were being called by suppliers between 2 and 4pm, a key trading time, and going off the restaurant floor for up to half an hour to dictate orders. Its purchasing process has now improved significantly.

The convenience of online purchasing systems can only improve further as more and more software is optimised for mobile devices. "The next evolution is clearly mobile," says Walters. "We are seeing a big shift to mobile devices - it's growing incredibly quickly."

Some 16% of UK hospitality orders are now carried out on mobile devices and Walters thinks this figure will rise rapidly. "If we were having this conversation next month, I think it would be 17%," he says. "Operators want sites to work as well on a mobile device as they do on a laptop or desktop computer."

Top tips for making the 
most of an online purchasing system

Make sure your employees buy into it "Staff, both at unit and head office level, need to realise this is the way you want to do things and what the benefits are to them," says Alex Walters, iTradeNetwork's European sales director for hospitality. "It is particularly important to make sure managers know this is much more convenient for them and that the benefits aren't just for head office."

Get your suppliers on board "The more integrated the order is, the better the experience for everyone," says Walters. "This means, at head office level, making sure your suppliers are all on board."

Capitalise on the system's 24-7-365 functionality Many operators don't use online purchasing systems to their full potential, so don't make that mistake. The systems can be used wherever you are in the world, at any time of day or night - as long as you have a computer and an internet connection. And, as more 
and more systems are optimised for 
mobile devices, the convenience factor will only improve.

Implement an initial training programme For Waterfall's purchasing manager, Jeff Reese, it is essential to put a training programme in place for staff before rolling out a system. "The same goes for suppliers," he says. "When we bring a new supplier on board, I go and spend a couple of hours with the person who will be using the system, teaching them how to load up their products. Putting a little time in up-front is key; the benefits that can come out of it are huge."

Be aware of everything the system can do Walters says: "We've had many current customers come to us and say, 'I'd like it if your site did X,' and we have to say, 'It does do X - you just haven't used it'. You need to ensure there is an awareness of all the functionality that's available and embed it into your core business process."

Ordering at any time of day

Thistle Hotels, the UK's third-largest hotel group, has saved more than £150,000 a year since rolling out iTradeNetwork's Multiple Operator Portal, which is used for all food, beverage and housekeeping orders.

Previously, Thistle was using an enterprise resource planning (ERP) system to manage purchasing at its 33 UK hotels, but although this worked well with non-food items, it could not cope with the complexity of food and drink ordering and led to inefficiencies.

Thistle wanted a system that offered better functionality and cost efficiencies, and the Multiple Operator Portal has improved matters. The system, tailored to Thistle's requirements by iTradeNetwork, enables staff to access the group's preferred suppliers catalogues online and place orders for food, drink and non-food items such as utensils and disposables.

Live orders are immediately available to view online and the system sends copies of orders to the group's finance department each day to ensure compliance and obtain purchasing authorisation. Invoices are sent to head office automatically, speeding up supplier payments.

Alex Walters, iTradeNetwork's European sales director for hospitality, says: "There are at least five users at every hotel. Each individual orders from several suppliers, making the process very complex. Our online system is fully automated and ordering can be done quickly at any time of day and is much less frustrating."

Control over multiple unitsWaterfall Services, which operates contract catering companies Caterplus and Taylor Shaw, implemented Epsys's e-procurement software four years ago and now uses it to place orders with 80-85% of its suppliers. It also uses the system for electronic invoicing and stocktaking, and is rolling out Epsys's menu-driven ordering system, powered by an integrated recipe costing function.

Waterfall's purchasing manager, Jeff Reese (pictured), says one of the system's key advantages is the control it provides at head office level. "We have operations managers who look after 12 or 14 individual units within our structure and obviously you can't be in 12 different places at once," he says. "With Epsys, you can open your computer, log on and see exactly what your units are ordering, when they're ordering, how much they're ordering , how much they've spent and whether they're over or under budget."

Reese says initial training is key to get the most out of the system. "It is essential to train managers to use it properly - all the little bits and pieces - because without that, you're not going to be able to use it to its full potential," he says.

Now Reese can't imagine the business without online ordering. "The benefits to the company are enormous - in terms of cost, visibility and control," he says.

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