Reference no: EM132177466

Sourcing Strategy at Starwood Bath towels. Televisions. Fresh produce. Uniforms. On the surface, these items may not appear to have any :relationship le WI Other. Sure. they exist in most households, even though they were probably bought independently of one another. Yet to the supply chain manager employed in, the hospitality industry. they not only nave a relationship, but New purchase can be critical to gaining a competitive advantage. Just ask Paul Davis, vice president of strategic sourcing for Starwood"s North Amer.ean operations. Nth hundreds of hotels and resorts h the United States, Canada. and the Caribbean. Davis"s goal is to create the hospitality industry"s best supply chain organization. The items procured Main his orga­nization not only include replenishable goods such as fresh produce and food items but also extend to the sourcing of national contracts for nonperishable goods such as bath towels, electronics. staff apparel, energy, and contract services. It is easy to confuse supply chain processes with the routine procure­ment of goods and services. Starwood a supply chain celesta/ dots incise contracting, but it is much more: It consists of the customer relationship, order fulfillment, and supplier relationship processes. Strong linkages exist among tae company"s upstream suppliers of services, materials, and informa­tion, and the customers of Starwood’s hotel and resorts. If the upstream rela­tionships are not carefully managed, downstream delivery of Consistency, quality, and value to Starwood"s guests may suffer. As a result, significant effort is placed on the nested processes within the supplier relationship process such as design collaboration, sourcing, negotiation, contracting. and intimation exchange. Any number of events will trigger the involvement of Paul Davis"s supply chain team:

Existing contracts expire.

Individual hotel brands seek new products.

Hotel properly design teams generate ideas.

New categories el products emerge and need evaluation.

A particular hotel needs he with a heal service contract.

When a product or service needs to be sourced. the specifications are driven by internal customers such as restaurant chefs, housekeeping, and maintenance. If the product or service does not attract exist, domestic and international stators that might be able to create the item are researched, as are regional and local vendors. Sometimes. sourcing an existing item sim­ply means renewing an agreement with a current supplier. Still other situation demand creating a new category that has not been sourced before or using a third party to help locate sources. Due diligence is always performed by sending potential suppliers a "request for information" in either paper or electronic form. The responses returned by the suppliers are entered into a database and help Starwood to pre quality the smellers. A good match is sought, requiring the suppliers to meet minimum requirements for financial viability. quality, scope of °aera­tions, references, and legal risk avoidance. With a suitable potential suppler candidate pool, Stanwood than takes one of two paths. The first one is to cm-act a reverse auction where preselected vendors bid against each otter. The method c used with shorter-term contracts on commodity items that have km external customer visibility. Kitchen uniforms. hotel room don keys, and Parr are scanted this way. The second option is to send out a request for proposal (RFPI. which requires the vendor to put its best terms forward at the outset for consideration. Alter review by the supply than team, the vent( winning the auction or emerging from the RFP review activity as the best fit is engaged in negotiations. Throughout the supplier relationship budding process, alarmed gets to know the vendors, but it becomes much more personal at this point as both parties move toward concluding their contract negotiations Starwood maintains a c000erative orientation toward its supplier relationships. building a partnership to maximize value for each patty to ensure that each side is comfortable with the price, quality. and (fernery requirements it has agreed upon in the contract negotiation process. When contract negotiations are complete. the different brands are notified and the buying and information exchange Processes begin. At this point. you might think the job of the supply chain team is done. Yet managing the existing supplier relationship after the contract ink dries is Perhaps the most challenging task of al. The contract Involving sourcing of bed linens and terrycloth items is a perfect example. Not long after the cam-tract was finalized, an alternate supplier approached Starwood with an offer to supply comparable quality goods at a much lower cost. Supply chain man. agers had a choice to make: continue to work with the existing Supper or bin Out the current supplier"s contract and begin sourcing with the new one.

QUESTIONS

Should Stanwood maintain a cooperative orientation Or a Competitive orientation with its suppliers for the kind of items described here?

What types of information should Starwood exchange wit its bed aims and terrycloth supplier? What does Stanwood risk by sharing too much Information?

How would you approach the sourcing of bed linens and terrycloth Items? That is. would you use a reverse auction or request for proposal? Under what circumstances would you change suppliers?

ln addition to performing value analysis on the services its Properties offer. Starwood evaluates the performance of its suppliers against con­tract metrics Wing the bed linens and terrycloth supplier as an example describe some of the meats Stanwood shook use.