What’s the impact of technology & AI on hospitality procurement & food supply chains?

Ollie Brand
Supply chain

Advances in technology and AI are increasingly becoming essential tools for businesses. So, what is preventing a greater adoption of tech across all aspects of hospitality today?

Making improvements to supplier relationships is becoming more crucial for hospitality businesses in their quest to enhance customer experience. Whether that means adopting new technologies to automate processes and manage spend or embracing the inevitable impact that digital innovations like AI (Artificial Intelligence) will have on purchasing decisions of the near future, diversifying your supply chain is now a multi-faceted conundrum. Yet, building a robust supplier network for the future is not simply about cost control and obtaining the best value for money; relationships are complex, especially those that will yield long term success.

Traditionally, if you were sourcing a product or service, you would consider a range of supplier options. You would then likely choose the offering that delivers the best quality and most competitive prices at that point in time, or you may base your selection on other criteria, such as whether a supplier is local to you or has stronger green credentials. Whatever the deciding factor, once suppliers are on board it is very easy to become complacent and to operate solely within those fixed circles. However, with technologies like AI the whole landscape of supplier relationships within the hospitality industry is ripe for disruption, as such innovations are poised to impact on the world of procurement in the very near future.

In Deloitte's recent report The AI Opportunity in Sourcing and Procurement they highlighted that “In today’s technology-driven world, many organizations still view artificial intelligence with an element of fear and uncertainty. As a result, the tangible benefits that it brings to sourcing and procurement are still largely untapped. But the critical strategic, customer, and operational insights are buried within the wealth of raw information that exists in both internal and external systems.” (source)

From automating previously mundane tasks within the procurement process and identifying potential suppliers, through to negotiating the best prices and managing complex contractual agreements, AI has the potential to help hospitality businesses to retrieve and aggregate data in a vastly sophisticated way, in terms of accuracy and operational efficiency. Hospitality businesses and operators will be able to evaluate their supplier networks with advanced insight and make decisions furnished with a far greater understanding of industry trends both at a macro and micro level.

The reality is, businesses need to widen their supplier networks, both to expand their range of purchasing options and to boost their powers of negotiation; advances in technology will help to facilitate this. Knowledge, and in this case data, is always power and it saves time and money too. If you want to discuss price rises and discounts with suppliers, you need access to intelligent, accurate data which can be accessed via the right procurement technology. For example, having access to anonymised, aggregated supplier data nationally and being able to highlight the indicative costs you could be paying (in real time) were you to re-tender your basket, might have a more tangible effect. Maintaining robust supplier relationships is vital and your suppliers will want to retain your business. If you can present your suppliers with a single source of truth using verified data (in terms of costs), there will be a much greater opportunity to negotiate, and you will have set a benchmark for communication and mutual cooperation in the future too.

However, although technology has the ability to completely transform the supply chain as we know it (through back of house processes, effective communication and collaboration) while having a direct impact on bottom line revenues, many hospitality businesses still shy away from new technology to enhance their supplier relationships. Perhaps this is because most businesses view the implementation of technology as a cost-reduction exercise rather than a revenue-boosting tool? Add to that the fear of disruptive tech such as AI, and it is easy to see why this whole topic needs demystifying if we are to untap the true potential.

So, what are the steps we should be taking in building supply chain relationships for the future?

Keep talking – communication is at the heart of any successful relationship. Regardless of the technology that helps us to converse or negotiate more effectively and build stronger partnerships, the objective is always to create mutually beneficial agreements.

Be open – robust relationships that stand the test of time require openness, honesty and transparency. That means sharing knowledge and data that helps all parties to strike a fair balance in terms of negotiation, service levels and flexibility.

Build trust – perhaps much of the fears around AI stem from a place of trust and understanding. The idea of technology making decisions for human beings can feel disconcerting. So, it is important to recognise that tech is not here to hinder relationships, nor will it completely replace human interaction (hospitality is first and foremost a people business) but it is here to enhance them by removing the more mundane tasks, streamlining processes, and allowing people to become better equipped for the jobs they love.

Embrace technology – innovations like intelligent procurement platforms and AI are here to stay, and they will have a much-needed positive impact on the hospitality industry as we know it. Day to day tasks will become more streamlined, freeing up more people’s time and improving productivity and decision making in the process.

Ultimately, as many businesses continue to battle against the risk of overspend and loss of control, advances in technology and AI are increasingly becoming essential tools. They can provide solutions that help reduce supplier agreements that are no longer fit for purpose, making the risk of overspend and loss of control a thing of the past. Technological innovation needs to be embraced as a critical enabler that will help organisations to build more effective, reliable partnerships that work collectively in conjunction with the current issues many are facing such as food inflation and shortages. And the sooner companies get on board, the more quickly they will reap the rewards - now and in the longer term.