Getting Stuff at the Best Price and On Time.
Hotels, senior care facilities and multi-family developments all need “stuff”, but not all the time. Do properties have on-staff administrators that that can handle the periodic upgrade or remodeling purchasing, or do they look to outside sources to help them temporarily? It depends on how they want to spend their money.
- Inside administrators know the property and its processes and procedures, but they may not have a database of competitive suppliers at their fingertips to make sure they are getting competitive pricing. Those talented day to day staff administrators may not have experience in logistics and project management which may result on costly learning curves. The most common mistakes properties make in procurement include:
- Incomplete design when procurement starts
- Unconfirmed product budgeting
- Incomplete or unrealistic planning of receipt, staging and delivery.
- Outside procurement professionals know the industry and while they don’t have experience with all the particulars of a property at start, should be fast learners. They can set up the team based on the particular project needs and include a member of the current property team so site considerations are prioritized. Procurement companies have a network of companies and manufacturers to draw from to get competitive pricing. Typically they have warehousing and trucking capabilities. Some of them have designers, artists, installers and a variety of other skills that can be purchased a la carte. When hiring outside procurement professionals may not be the best solution for a property:
- Unmanaged expectation of cost of services and weak contractual agreements. (Procurement services are 5% to 7% of a total budget based on the variety of SKU’s. Storage, delivery and installation is additional to procurement.)
- Unqualified design selections. (Design and selections have to be made and approved prior to procurement)
- Tension on teams where on site contractors and owners aren’t able to share information in real time to procurement professionals due to lack of trust or financial changes that challenge the job.
So what is the best solution for a property? Exploring the options and getting information specific to a project is the only way to know how best to proceed.
- If there is a $1M procurement project for a property that has 200 beds, and a fully completed and approved design, it is likely that a currently employed administrator will spend 18 months focused, partially or entirely, on the one time procurement project. Their efficiency will be compromised and their stress increased. And it is likely that other staff will be asked to participate because of it, which means you have more dedicated staff salaries diverted from their key job of keeping customers happy and the property running. In addition to salary costs, you still have the cost of storage and material handling, which means hiring a moving company. (Hopefully they have experience in staging at this scale.) Most properties never totally realize their costs when they manage projects internally.
- If there is a $1M procurement project for a property that has 200 beds , less than 300 SKUs and your designers has given you written specifications on all products including finishes, you will pay around $50,000 for outside procurement services, and you will have at least one staff administrator dedicating 20% of their time to the project. There is still the receiving, storage and delivery costs. But costs are known and there is a greater opportunity for accountability to budget.