There is not a single job in the hospitality industry that does not involve purchasing in
one way or another. A flight attendant must keep careful inventories of bottled water and
soft drinks to know how much to request for restocking. The manager of a hotel must
be able to find the best price for laundry detergent in a reasonable quantity for her size
operation. An accountant for a hotel chain must know enough about the company’s purchasing
agreements to take advantage of discounts based on timely payments. An event
designer must know the current price for linen rentals so he can make short-notice orders
in an emergency. These are just a few of hundreds of scenarios where purchasing plays a
critical role in the hospitality industry. Think about it for just a moment; it is the person
in charge of purchasing who spends the majority of the money made by a hospitality
operation, and it is his or her skills and knowledge that significantly assist in the profitability
of an operation. It could easily be said that purchasing is one of the most important
functions in any hospitality operation.
For most people, the term “purchasing” means simply paying for an item or service.
For hospitality professionals, this meaning is far too restrictive because it fails to convey
the complete scope of the buying function. For our use, the terms “selection” and “procurement”
better define the processes involved.
Selection can be defined as choosing from among various alternatives on a number of
different levels. For example, a buyer can select from among several competing brands of
beef, various grades of beef, particular suppliers, or fresh and processed beef products. One
person, generally referred to as a buyer or purchaser, may not perform all these activities or
make all these choices at one time. But they may be involved in most of them at some level.
Procurement, as opposed to selection, can be defined as an orderly, systematic exchange
between a seller and a buyer. It is the process of obtaining goods and services, including
all of the activities associated with determining the types of products needed, making purchases,
receiving and storing shipments, and administering purchase contracts.
Procurement activities are the nuts and bolts of the buyer’s job. Once buyers know
what is needed, they set about locating the suppliers who can best fulfill their needs.
Buyers then attempt to order the correct amounts of products or services at the appropriate
times and best prices, see to it that shipments are timely, and ensure that the delivered
items meet company requirements. A host of related duties surrounding these
activities include: being on the lookout for new items and new ideas, learning the production
needs of the departments they serve, appraising the reliability of suppliers, identifying
new technologies for procurement, and so on.
Not all operations have full-time buyers. Many have managers and supervisors who
do the buying in addition to their other duties. To these employees, buying means more
than what the term “procurement” by itself implies. These employees must also be aware
of the relationship between purchasing and the other activities in the hospitality operation.
Because there are so few full-time purchasing agents in our field, a textbook that
focuses solely on hospitality buying principles and procedures or product identification,
although useful to some, would unnecessarily restrict operating managers and supervisors
in hospitality. For example, it is not enough to simply know how to procure beef.
The typical operating manager must also consider what form of beef to purchase, as well
as whether or not beef should even be on the menu.
Today, operating managers must also deal with technology that has revolutionized
how buyers and suppliers procure products and services. This technology enables purchasing
managers to complete complex procurement functions with a few clicks of the
mouse. Most of these functions take place over the Internet.
Transactions done electronically are commonly referred to as “e-commerce,” for
electronic commerce. “B2B e-commerce” is the term used for business-to-business electronic
transactions and “B2C e-commerce” refers to business to consumer e-commerce.
Amazon.com, for example, relies on B2C e-commerce to sell its products to consumers.
B2B e-commerce that focuses specifically on procurement activities is referred to as “eprocurement,”
for electronic procurement. Examples of companies that make e-procurement
applications available to a wide variety of industry segments include:
Perfect Commerce www.perfect.com
Sterling Commerce www.sterlingcommerce.com
These companies have successfully revolutionized the way procurement is conducted
by harnessing the power of the Internet. One major company that focuses on the
development of e-procurement applications in the foodservice industry is Instill
(www.instill.com). Companies such as Applebee’s, Dairy Queen, Hardee’s, KFC, Pizza
Hut, Sodexho, Subway, and Taco Bell, rely on Instill’s e-procurement applications to
streamline their selection and procurement functions.1 Avendra (www.avendra.com),
one of the largest procurement services companies,2 has primarily focused on developing
e-procurement applications for hotels. The company was formed by ClubCorp
USA, Inc., Fairmont Hotels & Resorts, Hyatt Hotels Corporation, Marriott
International, Inc., and Six Continents Hotels.
We discuss technology applications for purchasing in more detail in thread 2. To
illustrate how technology has radically changed selection and procurement in the hospitality
industry, we explore new software, hardware, and e-procurement applications
throughout this textbook. We also examine the effect and ramifications this technology
has had on operating managers who are directly involved in hospitality selection and