Hospitality sector urged to tackle logistics costs

30 March 2009

31 March 2009 | Paul Snell

Buyers working in the hospitality industry should take control of their supply chains if they want to reduce costs, according to an expert.

Speaking at an event in London last week, David Read, chief executive of consultancy and consortium Prestige Purchasing, said improving distribution and logistics was a "huge hole waiting to be exploited" by buyers in the industry, and should follow the example of the retail sector.

"Maximised distribution is a huge cost opportunity that is relatively unexploited," he said. "Practically all of the major retailers, and even some of the smaller ones, own their own distribution. This is because they want to be able to reach down the supply chain and do deals with manufacturers, processors and growers. And yet in the hospitality sector the vast majority of businesses are still in a wholesale world."

Although buying from a wholesaler has advantages such as secure supply, he said, the process effectively outsources the supply chain. This drives costs up because buyers pay for stock they don't need and are more vulnerable to price fluctuations.

Read added buyers have a "huge range" of ways to bring logistics costs down, such as altering delivery locations, times, frequency and even centralising deliveries to one area.

Purchasers were also urged to examine the range of products they make available to their businesses.

"The phrase we often use is 'the choice of cost is cost'," he said. "If you have too much choice in your business in terms of product specification that drives your costs up significantly, so it is important to minimise the amount of product choice you have inside your business because you can then improve quality, improve safety, reduce stocking costs, reduce order costs and maximise leverage."

SMmar2009

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