Get the inside scoop on the major challenges/opportunities facing global supply chains this year and the future-forward strategies designed to grow clients’ brands, margins.
In this exclusive interview with Hotel Investment Today, Patrick Mayhew, vice president, head of strategic sourcing, Avendra, walks hoteliers through the key trends most likely to significantly impact the 2024-25 global supply chain and the proactive, flexible solutions Avendra’s procurement experts are developing to keep manufacturers’, distributors’ and hotel end-users’ businesses running smoothly.
1. Geopolitical risk mitigation
The hot-button issue: Tension in the Middle East. The immediate concern is the significant international supply chain disruption stemming from Yemeni Houthi rebel attacks on Red Sea cargo shipping. But the bigger question is what happens to oil supplies and pricing if sporadic attacks on tankers in the Red Sea escalate into concerted targeting.
Mayhew estimated the use of alternate routes bypassing the Red Sea in favor of transit around the Cape of Good Hope (up 74% YOY), for example, is adding two to four weeks to “normal” ocean freight routes. Drewry’s World Container Index had equally bad news about pricing. The index reported the average price of transporting a 40-ft. container on a cargo ship soared from just over $1,500 in December, 2023 to close to $3,800 in January of this year.
The strategic solution: Technology and newly incorporated AI integrations create a wider range of contingency plans faster and build in more predictive options for varied outcomes. “Combining tech, data and software tools allows procurement services providers to create not only a Plan B, but a Plan C, D and E and so on,” said Mayhew. “Getting ahead of problems gives supply chain managers time to find alternative product sources or transport routes. That lead time helps maintain competitive pricing, ensure quality – whether of the supplies themselves or condition at delivery – and develop backup plans that protect clients’ operations and margins.”
Data and tech also play a predictive role in optimally managing inventory against escalating geopolitical threats or forecasts for severe weather events. Using historical, current and forward-looking data alongside AI positions procurement services as consultative partners who can help manufacturers, distributors and their hotelier clients find the optimal tipping point for how much extra inventory they will need to stock to offer full services until the disruption ebbs.
This data also can define the key categories likely to come under the most severe and immediate threat and when to lock in prices, inventory levels and delivery timetables, Mayhew added. “Advances in technology, including AI, will expand supply chain management capabilities to improve clients’ efficiency and operations. It’s a real value add.”
2. Sustainability’s next evolution
The hot-button issues: Full-cycle sustainability; product innovation; buying decisions that build business and brand identity.
The strategic solutions: “There could be a significant brand risk for hoteliers who aren’t embracing sustainability, whether that risk stems from pollution to a big carbon footprint or buying products from manufacturers who use child labor,” Mayhew said.
He sees procurement services taking a more proactive, consultative role in achieving eco goals. “A lot of our clients are approaching us to help them improve their results internally,” Mayhew said. “We created a sustainability team that developed a comprehensive strategy across all the categories in which we operate.”
Combining tech, data and software tools allows procurement services providers to create not only a Plan B, but a Plan C, D and E…
Patrick Mayhew
“We targeted certain categories where we could leverage our size and scale to enhance our sustainable product choices and negotiate pricing on behalf of our clients. Two big areas of focus are post-consumer recycled content plastics and responsibly sourced palm oil – both of which we’ve now addressed successfully,” he added.
Watch for faster inclusion of planet-friendly products. A joint effort by Avendra and its distributor clients bolstered quick acceptance of the use of bulk amenities in hotel guest bathrooms. Next up may be soap sheets which further reduce plastic in hotel operations.
Turning to process innovations, Avendra is collaborating with business partners and market leaders to achieve full cycle sustainability. “The goal is to build out a complete, reliable, cost-effective recycling infrastructure,” Mayhew said.
Another major initiative centers on development of enhanced reporting on supplier emissions, which will be collated and shared with client distributors. “We want our client distributors to have better insight into how purchasing a certain product from a certain supplier would impact the environment in terms of overall sustainability and emissions,” Mayhew said.
3. Transparent, comprehensive DEI
The hot-button issues: Supplier diversity across categories; improved reporting.
The strategic solutions: Like sustainability, DEI among suppliers has gone from being an aspirational goal for socially-conscious projects to a foundational consideration for every hotel.
“The benefits of supplier diversity are many. DEI among suppliers promotes economic growth and job creation in underserved communities. By giving those businesses access to new customers and markets, they're better able to grow and thrive, which in turn helps to stimulate local economies,” Mayhew said. “Additional supplier diversity can also lead to increased innovation and competitiveness as suppliers bring new perspectives and ideas to the table.”
Mayhew added that the industry is at a pivotal point in addressing one of the biggest challenges to ensuring DEI among suppliers: identifying emerging companies and helping them scale up to manage large-scale hospitality projects.
What lies ahead
Looking to the future, Mayhew predicted that guestroom supplies will be a hotbed for innovation. He also advised hoteliers to brace for new legislation impacting supply decisions, much of which will be state-driven. “You never know what’s around the corner that we will have to solve for. Although, one thing is for sure. You can count on Avendra to help our clients proactively manage and leverage change.”
Mary Scoviak is custom and design content director at Hotel Investment Today.
The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today or Northstar Travel Group and its affiliated companies.