Risk Mitigation Strategies in Hospitality Procurement – Best Practices
All procurement comes with risk. These can emerge in various ways, such as late deliveries, errors from lack of automation, inconsistent quality, poor cost management, and more.
Purchasing goods and services is the foundation of all types of hospitality businesses. Therefore, exploring risk mitigation in hospitality procurement can help your business avoid these obstacles and continue to run smoothly.
Why Risk Mitigation is Critical in Hospitality Procurement
Risk mitigation is critical in hospitality procurement because it directly affects the business’s bottom line. Disruptions in the supply chain, if not properly managed, can hugely impact customer satisfaction and brand reputation, which are key assets for any hospitality operation. Fortunately, there are steps of caution you can take to reduce and manage these risks.
Common Procurement Risks in the Hospitality Industry
Understanding these potential stumbling blocks is crucial for the long-term success of any hospitality business. Common procurement risks include:
- Poor supplier relationships: Maintaining positive relationships with your suppliers can help you secure better prices, and discounts, and even improve the quality of goods and services. This is one of the most cost-effective risk mitigation strategies, as it will save you costs in the long run.
- Lack of eProcurement system: An online procurement system is revolutionary for hospitality businesses. It streamlines processes, reduces errors, and increases visibility, and much more. In essence, fewer errors and more data-driven strategies is a win-win situation.
- Absence of a clear procurement strategy: A procurement strategy empowers a business to be active, instead of reactive. This helps identify cost-saving opportunities, and allocate resources effectively, which eventually trickles down to improving customer satisfaction. Without a clear-cut procurement strategy, hospitality businesses may also miss out on bulk purchasing discounts.
- No contingency plans: Drawing up a contingency plan for when things go wrong is like having an insurance policy for your supply chain. It encourages proactive decisions and reduces the likelihood of disruptions, minimising financial costs.
- Inaccurate demand forecasting and analysis: Financial forecasting, when accurate, can help businesses make informed decisions, and prevent overspending, leading to sustained, long-term growth.
- Supply chain disruptions: Technological advancements such as real-time tracking and AI-powered risk assessments can help businesses stay ahead of the curve before disruptions occur. Real-time tracking can also reveal the financial health of your business, offering a clear overview to better financial stability and resilience during these disruptions.
Future Trends in Risk Management for Hospitality Procurement
Technological advancements such as artificial intelligence and automation are reshaping how risk is managed in the hospitality industry. As hotels shift away from outdated manual processes and embrace online procurement systems, not only will they be able to proactively reduce risks but also achieve greater control and visibility.
Risks such as unreliable suppliers, sudden price fluctuations, inaccurate data, and inefficient spending will be monitored more effectively with these new systems, especially if you’re managing procurement risks in multi-location hotels.
Staying ahead of the curve
FutureLog helps mitigate these risks, handling all aspects of purchasing, inventory management, strengthening relationships with suppliers, invoice processing, and more, creating a unified system to help you surpass the competition. If you are ready to take that next step, contact FutureLog and learn how our solutions can help.
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