Starwood Builds a Global Supply Chain with Cloud P2P

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Starwood Builds a Global Supply Chain with Cloud P2P

By Scott Pezza, Principal Analyst, Blue Hill Research - 11/06/2014
In 2011, Starwood Hotels & Resorts had its own in-house procure-to-pay system that was fully integrated for all of its U.S. properties. It was a system they owned, they ran, and for which they wrote the code internally. When Tad Wampfler came on board as Chief Supply Chain Officer that year, he set his sights a bit broader. “My goal as CSCO, seeing that we’re growing rapidly, was to ask: how do we best run a global supply chain?” says Wampfler. After surveying their non-U.S. locations, it was clear that they lacked any truly global data. That was a big impediment when looking to build an integrated global supply chain.

For Starwood, the focus was on finding a true systemic solution. “Our goal was to have a single, global, cloud-based, integrated P2P system available for our hotels,” says Wampfler. With that system, Starwood sought to achieve four important objectives: to gain visibility into the supply chain in order to improve purchasing; to act while being mindful of global citizenship, ensuring it was understood who  was being bought from; to share and enforce brand standards; and to fulfill fiduciary responsibility for financial soundness and security, especially when operating in areas where bribery is more commonplace than it is in the U.S.

There were other drivers as well, including both direct and indirect financial goals. The biggest was focused on buying better and leveraging spend in procurement. “For a company of our scale, there are better buying opportunities,” says Wampfler. “These can be global, local, or even within a single city or single hotel. Sometimes there are different groups buying similar services. That’s where the big dollars are directly.” The level of visibility required to achieve this goal was not available with the disparate global systems that existed at the time.

Next, Starwood looked at the process efficiency of doing everything electronically. Specifically, they focused on gaining the benefits of using electronic, rather than paper, invoices. Finally, they looked to the financial impact of systems efficiency. “We looked at the efficiency of running a single system versus having all the local IT groups working on different systems,” says Wampfler. “It’s hard to quantify, but we know we spend a lot on it.” That view shows an appreciation of the functionality available to line-of-business users, the potential burden to IT due to fragmented deployments, and the ultimate financial impact their choice would have on the bottom line. It is an approach that Wampfler sums up succinctly: “Ultimately, we wanted to improve the profitability, first and foremost, of our hotels and then support them efficiently from a management perspective.”

Taking stock of systems across global locations
Even though they didn’t have P2P around the globe, they did have an existing list of 10 to 12 eProcurement providers across all the locations, in addition to their self-developed solution. To ensure that they hadn’t missed any important vendors, Starwood engaged with Gartner to see if there were any other relevant providers in the space. With that background, they created a list of ten possible suppliers.

Their next step was sending out requests for information (RFIs) to the list of identified providers. Since most of these criteria were black and white, it was a quick process to whittle the list down.

The final two providers were invited to Scottsdale, AZ. Wampfler and his team had prepared 70 scenarios, which they gave to both competitors. Working from the same set of scenarios, both vendors had to demonstrate their how their systems would handle them -- live in front of a group of thirty Starwood representatives. For each exercise, the appropriate Starwood staff would be on-hand to observe. “If we had Food & Beverage questions, we had chefs in the room,” says Wampfler. “For financial controls, we had accounting. Each group did a day-and-a-half, after which we gathered up everyone’s input and made the final selection.” At the end of the day, BirchStreet came out on top.

Taking a flexible approach to implementation
Starwood’s locations are divided into three main categories: owned (4%); managed (48%), and franchised (47%). “For our owned and managed hotels, this will cover them,” says Wampfler. “For franchised hotels, it will be an option. Many of them have their own systems, but we’ll make this available.” Above all, they are taking a flexible approach to provide what best suits each individual location. “We expect that the whole suite will be available to the hotels. In the U.S., not many will take the inventory module. In Asia, they all will. Hotels without restaurants won’t need recipe management, but everyone will get eProcurement.”

With their selection process complete, Starwood is now in the pilot stage. “We’ll start deployment about this time next year when we get through the pilots and finish the integration bridges that need to be built.” It is a progression, from selecting the best-suited provider, to piloting, learning, and positioning themselves to bring a new system—and new processes—to emerging markets. “My vision is that the P2P system is likely the best solution for just about every hotel out there – 99% of them,” says Wampfler. “We’re spending millions of dollars on all of the integrations that come with this. And it’s a good investment. The hotels will repay us for it ultimately, but it will be a terrific ROI with very quick payback when the hotels see the efficiency and effectiveness that comes along with it.”

The full report from Blue Hill Research can be downloaded here.

Scott Pezza is Principal Analyst for Blue Hill Research. Blue Hill Research provides unique and differentiated guidance to translate corporate technology investments into success for the three key stakeholders: the technologist, the financial buyer, and the line of business executive.
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