Innovations in Sourcing: Hilton Supply Management

Posted: 09/01/2019 - 00:16
Innovations in Sourcing: Hilton Supply Management

This October, the Future of Sourcing Awards will celebrate organizations and individuals that have shown innovation, leadership and transformation in categories that are critical to the sourcing industry. Interviews with the finalists provide helpful insight about their projects, the problem they sought to solve and the impact to their organizations. Read more about HSM's response to the need to keep up with changing expectations, HSM set out to transform the procurement process — increasing efficiency and agility for it's owners, properties, and internal corporate stakeholders with a one-stop shop approach for products, ideas, and service excellence they call HSM 2.0.

Can you outline why your team embarked on this project and the problem that needed to be solved?

Supply chain management can be a game changer for a business’s bottom line. Companies are demanding more out of their supply chain, and procurement divisions need to keep up. At a minimum, smart procurement solutions can dramatically cut costs, but they can also drive innovation. Hilton Supply Management is a living example of that. 
In response to the need to keep up with these changing expectations, HSM set out to transform the procurement process — increasing efficiency and agility for our owners, properties, and internal corporate stakeholders. This new transition to a one-stop shop for products, ideas, and service excellence is what we called HSM 2.0 and it has moved us forward to become the dominant player in our field.
With HSM 2.0, we redefined our areas of focus, strengthened capabilities, targeted aggressive growth, and invested heavily in talent and technology. In short, it surpassed mere cost savings to deliver a more innovative, partner-based approach to procurement. 

How were things done originally and what was the inspiration to innovate the process?

Hilton is a 100-year-old industry pioneer. More than 50 years ago, we were the first hotel company to launch an organized procurement division. The idea was, “why not use our vast number of hotels to leverage, and lower, the associated costs of running a property?” This worked so successfully for Hilton hotel brands that it was rolled out and eventually made available to non-Hilton brands. 
By negotiating competitive supplier contracts and purchasing in large quantities, HSM is able to drive tremendous value. But there is more to running a successful property than smart spending. There is attention to detail, quality, technology infrastructure, brand consistency, a whatever-it-takes attitude, and a two-way partnership — all of which our expertise and experience provide. This is what sets HSM apart from the competition. We are a full-service, global hospitality procurement “go-to.” Providing a one-stop shop adds an unprecedented level of simplicity and ease for our clients. 

What KPIs did you use to measure success for this project? (For example: performance, customer satisfaction, revenue, sales or relevant financial gains)

HSM uses a number of critical year-over-year (YOY) key performance indicators (KPIs) to measure the success of our transformation. KPIs begin with those related to financial performance, including a 2018 global revenue increase of 32%, global savings increase of 11.5%, and an EBITA (earnings before interest, tax, and amortization) increase of 60%. 
2018 also brought a remarkable 261% increase in new customers, while GPO incentives increased by 28% and revenue from project procurement fees rose 56%.
We augmented our team member base by 40% to support the organizational transformation. We promoted 33 HSM team members and recruited another 29 from within the Hilton enterprise who are experts in their fields. Team member satisfaction scores also showed an impressive increase of four to six points across key metrics. 
Other KPIs included customer satisfaction, customer retention rates, growth in number of diverse suppliers, and creation and launch of new prototypical Furniture, Fixtures & Equipment (FF&E) décor packages for at least five hotel brands, allowing owners to save anywhere from 3-18%.

How do you plan to ensure that the new model remains relevant and adapts to the future needs of the market?

Personal relationships with our owners and constant contact with our suppliers allow us to deliver an exceptional procurement experience. We host regular meetings with owners and suppliers, such as our 2018 Global Supplier Summit where we brought together suppliers from around the world to participate in meaningful engagement with both Hilton and HSM leadership. Inviting a variety of perspectives to the same table yields unique and unexpected solutions.
We also follow industry trends and new product innovations, and constantly scan the competitive landscape. Using leading-edge technology, we monitor the procurement industry and apply customized analytics to identify new opportunities for savings that we can then pass on to our customers.
Another example of our continuous investment in technology to help stay ahead of the competition is our recently launched SupplyTrak. SupplyTrak is a new application for managing packaged and customized FF&E projects. It features robust dashboards and mobile-friendly navigation, as well as enhanced analytics that makes it easier to service our customer’s new builds and renovations.
Finally, everything we do is held up against our mission of spending less and spending smart. Remaining true to this mission generates customer loyalty and consistency throughout the organization.

What advice do you have for those who may want to implement this innovative approach in their own organizations?

Find top talent. We believe in enlisting the best of the industry’s best. For us, that means promoting from within and looking to companies we admire most. We look for senior leaders who value teamwork and communication supported by regular outreach, such as industry updates, new team member announcements, and newsletters. 
Invest in your team. Your salesforce, account management personnel, and field operations people are essential. They are your frontline to the customer; they engage and help them through every step of the process. Partnership and trust between your organization and clients start here. Importantly, your key relationship partners need leading-edge technology to deliver on your promises. We recommend developing a web-based customer portal, which empowers and enables clients to access purchase reports and pull exact spend details — anytime, anywhere.
Commit to corporate culture. It starts with a commitment to listening to our team members. We believe that giving them a voice gives them the opportunity to own, earn, and share in HSM’s success. Listening can take the form of all-hands meetings, town halls, and employee surveys to take the temperature of team member engagement. Strong corporate culture and commitment to community are also keys to success. Creating a positive work environment, volunteer opportunities, and supporting a diverse range of suppliers — of all sizes — go a long way to make employees’ jobs meaningful. It’s a philosophy that recently landed Hilton the #1 spots on the 2019 Great Place to Work® and Fortune Best Companies to Work For lists. Accolades like these help HSM attract and retain talent and motivate team members to create new and better ways of doing things. 

How much time did this specific innovation take to implement into your organization?

Two years ago, we make a commitment to our owners that we would become easier to do business with. The turnaround began in the spring of 2017 when we engaged in an operating model analysis to assess how we functioned and identify key systemic changes required to improve. This produced a strategic plan focused on four key areas needed to build and grow. Organizational adjustments rapidly ensued, which better aligned our business with the needs and expectations of our customers. 
This transformation brought a renewed energy to HSM and included a rebrand to mark the change. The effort also entailed ongoing outreach to owner and management groups around the globe to understand what they wanted and expected from a world-class procurement organization. 
HSM set into motion an aggressive strategic plan to be the industry leader. The journey we began two years ago continues to this day, as do the lessons learned. We are committed to be the best and to provide our employees with the tools and work environment needed to exceed expectations every day. We are an exponentially stronger organization as a result, with more durable and deeper relationships with our clients than ever before. We know that this will raise the profile of our well-regarded business portfolio, and spur continued growth in the future.

About The Author

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The 2023 Future of Sourcing Awards recognizes organizations and individuals that show innovation, leadership and transformation in categories that are critical to the sourcing industry. The Awards will take place on October 18, 2023, the capstone evening at the SIG Global Executive Summit. Attendees will enjoy dinner, networking and an awards ceremony that brings together some of the brightest minds to create a truly remarkable experience.