Hilton Supply Management’s ability to find efficiencies allows it to be a leading global supply chain solution provider. By Eric Slack
Few brands are as synonymous with hospitality as Hilton. Its legacy in the industry extends back for nearly a century. Among the many important pieces of its legacy is Hilton Supply Management (HSM), an organization that leverages the purchasing power of the Hilton portfolio along with external hospitality brands to serve as an end-to-end global supply chain solutions provider.
“As a global procurement organization, we are focused on developing and executing on programs and policies that serve the interests of properties and guests,” said Bill Kornegay, senior vice president of supply management. “HSM is wholly owned by Hilton; we provide goods and services for Hilton along with properties owned by independent owners, real estate investment trusts (REITs) and management companies. We want to be the premier provider of hospitality goods and services wherever we operate.”
Just as Hilton has served the world’s travelers and set a gold standard for hotels around the globe, HSM has created a gold standard for providing the global hospitality industry with unique purchasing solutions and an operational mindset born from a rich heritage in hospitality. Service and focused industry expertise are at the core of its business, which sets the organization apart from purchasing generalists.
The size of HSM’s customer base is staggering. Currently in the Hilton portfolio are 4,800-plus properties across 13 brands in more than 100 countries. The brands include Hilton Hotels and Resorts, Waldorf Astoria, Conrad, DoubleTree by Hilton, Embassy Suites, Hampton, Hilton Garden Inn, Homewood Suites, Home2 Suites, Tru by Hilton, Canopy, Curio – A Collection by Hilton and Hilton Grand Vacations. Additionally, Hilton has more than 1,700 properties in the pipeline. Altogether, HSM supports supply chain management for 6,000-plus properties across 65 brands (13 Hilton along with 52 non-Hilton brands).
“Success is predicated on the model we use to aggregate spend,” Kornegay says. “The more goods and service we procure, the better leverage we have with manufacturers to procure items at a low cost that we can pass on to our customers.”
Today, HSM seeks to discover efficiencies in all aspects of the global supply chain, from manufacturing through delivery, negotiating and securing value-based pricing with suppliers and service providers that meet or exceed operational standards. Its proven pricing programs, extensive procurement technologies and deep expertise in hospitality allow HSM to be a strategic partner now and in the future for its clients.
At a high level, the key challenges for HSM are centered on customer satisfaction while working to drive profitability and sustain costs. These are the most pressing issues facing the organization’s supply chain, logistics and strategic sourcing operations. The financial management aspect is further challenged by market volatility and recovery cycles, which impact manufacturing and distribution activities in particular.
Business requirements are key to HSM’s sourcing activities, particularly with the expanding footprint of new hotel construction, ensuring brand standards compliance and meeting aggressive construction schedules. This coupled with the sourcing activities for established properties drives the need for spend analysis to fully document what products are purchased along with the quantities of those products. These are essential for the development and management of a successful strategy.
“HSM customizes our service based on the customer needs,” Kornegay says. “From reporting, analytics, ordering options and targeted goods and services, we consistently grow our supply chain and enhance the customer experience, allowing the properties to focus on their guests.”
Building strong supplier and vendor ties is critical for HSM. It has dedicated team members who manage each account relationship. “We strive to stay relevant and work with our suppliers to ensure we are getting the best products for the best price, and we allow them to participate in our discussions around what products we offer,” Kornegay says.
About 10 percent of the vendors that HSM works with are considered strategic suppliers. These include companies such as LG and the Coca-Cola Company. With that tier of supplier, HSM has multi-year deals in place and works with the suppliers across the entire spectrum of its hospitality portfolio.
“The strategic suppliers represent nearly three quarters of our annual spend,” Kornegay says. “We have commodity partners that are more localized, short-term contracts. We have several partners in each category that allow us to fulfill different needs.”
Indeed, HSM’s services and solutions are extensive. They span the spectrum of strategic sourcing, operations support, project supply management and business solutions.
In the strategic sourcing realm, HSM has developed and negotiated global and regional pricing agreements with hundreds of suppliers of hospitality products and services. This helps to secure and offer their properties value-based pricing, superior products and the highest-quality service standards through strategic sourcing solutions with reputable and responsible supplier partnerships. HSM leverages the volume of its entire portfolio to secure best-in-class pricing on all products and services, creating extraordinary value for the properties it serves.
HSM’s food and beverage strategic sourcing team works closely with national and regional food and beverage manufacturers to provide customers with an extensive offering of consumable products, supplies and equipment. HSM provides superior pricing with a variety of manufacturer programs for the food and beverage products required to successfully run a property.
Consumable programs include meat, poultry, seafood, grocery and dry goods, solid and frozen dairy, bakery, produce, and alcoholic and non-alcoholic beverages. HSM also offers equipment and supplies including china, glassware, flatware, kitchen equipment, banquet equipment, large and small appliances, and other smallwares.
Its food and beverage sourcing experts also provide an array of value-added services, including a comprehensive food safety management program backed by an industry leader in sanitation. This customizable program gives HSM’s clients the tools to maintain the highest standards of cleanliness for the safety and health of guests, including employee food safety training and regular audits to help identify and rectify any potential risks in safety practices.
HSM’s project management service can also help with turnkey kitchen projects. These services include design planning, identifying and specifying equipment, procurement, logistics and installation. Leveraging its strategic relationships with food and beverage equipment manufacturers and installers allows HSM to provide competitive prices on the products needed to complete kitchen construction, renovation or replenishment.
Beyond food and beverage, HSM’s strategic sourcing capabilities extend into guest rooms and public spaces, property operations, energy management, and sustainability and responsible sourcing. If clients are looking for items for guest rooms or furniture for their lobbies, HSM’s programs can handle all requirements, including products for ongoing operations and renovations.
HSM supports operating supplies and equipment needs through uniforms, linens and terry, and amenities and pet programs. Its furniture, fixtures and equipment (FF&E) offerings include casegoods, upholstery, flooring, window treatments and indoor/outdoor furniture.
Additionally, HSM’s property operations strategic sourcing team offers an extensive range of negotiated products and services to keep all the operating areas of a property running smoothly. Its supplier agreements include maintenance repair and operations (MRO), service agreements and print and promotional items. MRO equipment and supplies include tools and hardware, electronics, RFID door locks, safes, plumbing and paint, signage, vehicles and vehicle wraps.
HSM also provides service agreements in areas such as pest elimination, water treatment, TV content, gateway and security, elevator maintenance, public space cleaning, temporary labor and third shift, scenting and clean air, roofing, public space music and on-hold messaging, and waste management. It can assist with print and promotional items such as key cards, logo food and beverage disposables, logo apparel, in-room collateral, on-property marketing materials, business cards, stationary and more.
In the energy management arena, HSM manages the purchasing of electricity and natural gas in regulated and deregulated markets, in addition to providing renewable energy and related utilities programs for its properties. In support of Hilton’s commitment to corporate responsibility, HSM offers programs for efficiently reducing the cost and carbon footprint associated with the consumption of required utilities, and it can manage supplier relations for purchasing energy-related hotel services and products. Its energy procurement services include electricity, natural gas, steam, alternative renewable energy, utility bill pay, and energy audits and management services. Energy products include HVAC, PTAC, thermostats, lighting controls, electrical supplies, electric vehicle charging and building automation systems.
Then there is sustainability and responsible sourcing. HSM is committed to driving a global sustainable procurement strategy that takes into account the environmental, social and economic impacts and benefits to its properties. Through its strategic partnerships and sustainability initiatives, HSM develops and implements programs that enable properties to divert waste from landfills and reduce water and energy usage.
HSM manages a complex supply chain and engages with business partners who are committed to delivering products and services responsibly. Its responsible sourcing policy outlines the fundamental principles, environmental, social and economic, that are expected of all suppliers, regardless of their region. HSM’s sustainability and recycling programs include mattress and TV recycling, universal waste recycling, synthetic turf landscaping and food digesters.
HSM’s operations support team has extensive experience in managing all areas of hotel purchasing. This experienced leadership combined with a regional presence in the field ensures that HSM can leverage opportunities to supply solutions by providing unparalleled service and procurement expertise to client operations.
Customer service is a critical part of this effort. Because HSM comes from the world of hospitality, it understands that unparalleled customer service and support are critical to help customers deliver service excellence. Its team of supply management professionals will ensure that client needs will be handled with the utmost attention and care from start to finish.
HSM has a regional operations support model which aligns dedicated individuals to the properties in their regions, providing consistent, personalized service accentuated with market-specific knowledge. Located in major markets worldwide, HSM’s professional and knowledgeable operations support teams are the first line of service for questions, consultations or issue resolution. Thanks to their practical hotel experience, HSM’s field operations teams add value with meaningful insights and advice to increase efficiencies.
Beyond that are HSM’s regional commodity programs, which are groups of specialized supplier programs that have been negotiated for commodity suppliers in each metropolitan area. Using a best-in-class approach where the market volume can sustain multiple suppliers, pricing is negotiated by supplier category. This gives clients a degree of flexibility in purchasing the freshest quality products with consistency in product and price from the strongest suppliers in their market or region.
HSM’s regional distribution programs are another important element, as they leverage the purchase volume of properties within or across regions and/or categories to reduce base product costs for participating properties. By driving economies of scale, HSM is able to negotiate powerful savings with distribution partners covering an expanded geographic scope.
The organization’s distribution programs produce improved productivity and cost reductions, while providing the flexibility to customize solutions for individual markets and properties. If needed, HSM can further leverage the effectiveness of its regional distribution program relationships with a strategic category management program, working closely with the distributors on tactical SKU rationalization and manufacturer consolidation to achieve even greater category savings impact.
Project supply management is one more area where HSM delivers unparalleled service to hotel owners and developers. Its hospitality focused teams will help clients to complete new hotel builds or existing hotel renovations on time and within budget. HSM manage all aspects of the purchasing process for every aspect of new builds or renovations.
HSM’s project development team works with renowned designers and owners to refine and execute their exclusive packages, providing estimates for renovations or new build projects. This customized service provides owners and developers the necessary tools and information needed to get a project underway including budget scope of work, critical path timelines, financing and leasing options.
Its project supply management team can manage the entire FF&E purchasing process for every area of a property including guest rooms and corridors, lobbies, restaurants, lounges, meeting rooms, pool and patio areas, laundries, administrative offices, business centers, fitness centers, back-of-house, administrative areas and interior signage. HSM’s project supply management and logistics team also helps to ensure that projects are completed on budget, on time and to a client’s total satisfaction. The team works closely with general managers, owners and developers throughout the entire project process to help ensure success.
HSM tracks projects using a proprietary project supply management software program that tracks each project’s process including budgets, pricing, expediting, delivery, reporting and analytics, from inception through completion. The comprehensive project management services include everything from competitive bid processes for project items, a dedicated single source contact, regular project updates, model room build-out experience and assistance with designer contacts to pre-screened contacts for installation and warehousing management, pre-approval of any changes prior to purchasing, product improvement plan (PIP) assistance, post-project assistance, freight consolidation, claims assistance, expediting and logistics management and freight management services.
HSM also offers guest room design packages for the newest brand, Tru by Hilton, and it is presently developing brand-specific and endorsed packages for multiple other flags within the Hilton Worldwide portfolio. HSM’s guest room packages allow the organization to deliver customization, functionality and value for clients along with all-inclusive décor schemes for the comfort of their guests. It works closely with reputable manufacturers to ensure that the products and specifications are custom-tailored to a brand’s specific standards, and its brand-approved guest room packages have been extensively tested in real hotel environments to ensure their functionality and durability.
“We work very closely with our business partners in all of our brands, and as they develop new concepts they work with us and our supply partners to determine the products they need and build them into the concept,” Kornegay says. “Within each category, we can look at what format works best and how it differentiates the brands while working within a framework that our suppliers can accommodate.”
Another benefit of working with HSM is its eProcurement system, which simplifies the purchasing process. HSM deploys business-to-business applications across its portfolio of brands and ordering disciplines, providing properties with significant increases in system functionality and access to scalable solutions for each property’s requirements. HSM’s eProcurement catalogs contain products representing its many negotiated spend classifications. These include food and beverage, FF&E, services, printing, uniforms, maintenance repair, operating supplies and equipment.
System users at the executive and property levels can benefit from the convenience of integrated declining checkbook features and electronic approvals processes. HSM can customize the eProcurement system to meet the unique needs of each property and provide various service and support levels to ensure efficient adoption of the system. By delivering technologically advanced support and resources, HSM helps clients have easy access to current information about their purchasing operations.
HSM is also launching a customer portal in 2017. As part of its ongoing effort to deliver technologically advanced support and resources to customers, creating the HSM Customer Portal will provide access to the latest information about purchasing operations and the resources needed to manage it. This technology will be exclusive to HSM customers and offers features that will change the way clients operate. These features will include self-service reporting, integrated dashboard analytics, searchable product and program details, instant access to supplier contact information, estimator tools, alerts and updates and a mobile-friendly design.
“When we look at the trends impacting our business, it is all about big data and the desire for more information while providing it in user friendly formats for customers,” Kornegay says. “We must be able to provide them with as much information as we can when they need it and how they need it. That is why providing them with a portal through a customer facing website is important, as it can help them to understand spend at company, property and category levels. It will also help us to communicate regularly with them about updates, upgrades and changes and allow them to see their spend data and analyze that information.”
In the coming years, HSM will continue to serve its clients, those within Hilton and beyond. Hilton is in the midst of spinning off its real estate and timeshare businesses into standalone companies, and the Hilton family will become: Hilton, Park Hotels & Resorts and Hilton Grand Vacations.
“Our business model will work the same way after the spinoff,” Kornegay says. “We will provide goods and services for their properties as a third-party provider. There will be a need for us to make sure our contracts are more robust and put them in place with the new entities, but what we do and how we do it won’t change.”
Within the hospitality procurement sector, there has been consolidation in many categories, and that consolidation is driving competition. HSM will continue to provide the best-in-class service by focusing its efforts within its development group, actively engaging external parties so it can get its goods and services to market.
“Historically, we’ve leverage the Hilton relationship to drive our growth, but now we must compete more actively for the pool of business in response to consolidation,” Kornegay says. “Our key investments will be in our ability to communicate information to our business partners, customers and suppliers. Big data and consolidation in the industry are the trends, and there is more fierce competition that is driving our thinking going forward. We must also always invest in our people to make sure we have the best and brightest on our team, give them the training they need to succeed.”