Is your hotel listed as a preferred customer in your supplier’s contract? This may be more important than you realize. Ask suppliers these three questions to help you remove the “but” from your RFP equation.
Sometimes basic research is not enough if your hotel or property company is looking for a new supplier. Hoteliers should carefully consider at least three crucial areas before finalizing a deal and signing on the dotted line.
The responses to requests for proposals may be in line with hotel objectives. They seem to have reasonable prices and will provide the necessary services. Referrals can be reassuring and everything seems to be moving smoothly after due diligence, which includes negotiating with all companies that present a proposal and visiting the sites of any suppliers being considered. Even the best-laid plans may run into unexpected problems. Here are three questions suppliers should ask to prevent the inevitable “but” in the RFP process. This will ensure that your relationship with suppliers is mutually beneficial and profitable over the long-term.
- Is My Hotel the Most-Favored Client Status?
A featured term in many procurement contracts is the Most-Favored customer status. This means that suppliers won’t sell their goods or services in the specified marketplace for a lower price than what they are offering to your hotel. Although it sounds easy, it is not. To get the best prices every day, hoteliers must have leverage with suppliers.
- Are You Sure Your Hotel is Safe?
The supply chain of the hospitality industry is not without risks. Each event can have a devastating and expensive impact on your business, regardless of whether one person falls on a rug or if several people get food poisoning. Indemnity provides peace of mind for employees and guests who are injured while using the supplier’s product. Indemnification clauses generally require the supplier to defend the owner and the hotel operator from any claims related to its goods or services in the event of an incident with a guest, or associate. The supplier will indemnify the hotel against any damages or losses caused by its goods or services.
To protect your hotel, ensure that any contract you sign is strong in indemnity language. It is important to determine the appropriate level of indemnity due to the nature and extent of the services being provided. It can be difficult to determine the right level of indemnification for your supplier.
- What happens to the supplier after the contract is signed?
It’s fine to sign the contract if you are an MFC and your hotel is insured. However, the supplier’s day-to-day management should be meticulous and ongoing in order to ensure accurate pricing and high quality products. Hoteliers should have the ability to hold suppliers accountable, and have a process to quickly and successfully resolve any problems that may arise. It is important that hoteliers manage and control the entire supply chain. This includes quality, cost, and service. They must also monitor each supplier’s performance and set standards.
A quality assurance program must be implemented if the hotel doesn’t have one. For example, the Food Safety Modernization Act requires that there be a high degree of transparency throughout the supply chain in order to meet ongoing regulatory requirements. Regular checks and surprise audits should be performed by hoteliers to ensure that the supply chain is safe. This includes monitoring the fields where the produce is grown, the supply chain, and the hotel’s door. For example, this means that produce must be properly chilled, damaged or bruised products should be culled and replaced, and that proper QA testing has been performed on the product. It is important that any delivery issues or problems are addressed immediately by the supplier partner of the hotel so that business can continue as normal.
Monitoring and auditing supplier pricing is another important aspect of supplier management. This will ensure that the price matches the contract. In the food and beverage industries, prices for goods and services fluctuate. Pricing is affected by seasonality, supply and demand and fluctuating raw material costs. For hoteliers to ensure that all pricing contracts are reviewed and updated on a regular basis, they should establish a price audit program. Procurement staff should investigate any variances in transactions and work with distributors or manufacturers to resolve them.
Chip McIntyre, senior vice president, strategic Sourcing, is Avendra’s North American procurement services provider. McIntyre is responsible for Avendra’s supplier management and contracting functions as well as its supply chain development team.