In this article, John Stirrat, General Manager of the New Lanark Hotel talks about his focus on procurement and how his strategy on outsourcing this critical function is reaping rewards – both in financial savings and efficiency gains for the organisation as a whole.
Background
Located on the river Clyde in South Lanarkshire, the historic New Lanark cotton mill village, with its hotel, restaurant, visitor centre, hostel and self-catering facilities, has become a major tourist attraction for the area. It is one of six UNESCO World Heritage Sites in Scotland in addition to an Anchor Point of the European Route of Industrial Heritage.
The hotel and visitor centre operate as a subsidiary of the New Lanark Trust, which is a charitable trust. This means that all profits generated are returned to the trust organisation, which is then used to help fund the management, restoration and ongoing preservation of the heritage site.
John Stirrat, General Manager of the New Lanark Hotel talks about his focus on procurement and how his strategy on outsourcing this critical function is reaping rewards – both in financial savings and efficiency gains for the organisation as a whole:
“It is rather a unique destination and one we are all very proud of. The hotel provides quality accommodation and leisure facilities, while the visitor centre has over 150,000 people come through its doors each year. We want people to enjoy their visit from start to finish and so providing a quality service across all aspects of the organisation is important to us.
I took the decision to identify a purchasing partner to support the organisation in managing specialist areas; in this case, the food and beverage procurement for our catering functions.
I was finding that I was spending a lot of time negotiating with various suppliers and managing tactical, granular details such as deliveries or line item pricing, which was a big diversion for me.
I’d spoken to two procurement companies, one of which was Pelican Procurement Services and the other was a competing firm of theirs. I didn’t like the model of the latter as I felt they restricted which suppliers we could work with to just a handful of national operators – I didn’t want to be limited as I felt that would be a backward step. Whereas with Pelican it was far more open and transparent, with the option to work with any supplier – whether local or national. I really liked what I was seeing.
Managing Food, drink and non-food procurement
New Lanark started to trade with Pelican in November 2016 where it was agreed that the Pelican team would manage all our food, drink and non-food procurement, and much to the delight of our board of trustees, the results have been phenomenal!
Over £40,000 of savings have been realised, which directly benefits the Trust. There is however much more to this relationship than just financial savings, which I didn’t originally envisage at the outset.
Price management has been a big benefit for me. Previously, the heads of department were responsible for their own budgets yet prices would rise unexpectedly and it would be hard to manage. Prices would go up and we wouldn’t always be aware. With Pelican, they are ahead of the curve and their industry knowledge and relationship with the market means they know what’s coming and can work on our behalf to mitigate rises wherever possible.
Our costs need to be in line with budgets and we need to make sure we are receiving value for money from our suppliers. Pelican acts as an extra member of our team – I feel as though Simon Gurney, Pelican Procurement Manager, is in the office next door to me, as another colleague! Pelican team are my eyes and ears and are fully aware of market changes and what we need to do to mitigate rises so we are not surprised by any changing costs.
For example, milk and butter are purchased in large quantities here for our ice cream production – prices really shot up last year. It was good to have Pelican by our side, as Simon went to suppliers to negotiate fixed prices for us. A decision was made to divide the products between two suppliers – one directly from a dairy, and the other was a national supplier. That made sure milk was purchased with the right margin for us. Then, as prices started to come back down, Pelican has been able to renegotiate once again. It just means we are one step ahead of the market changes and not chasing our tail.
From a management perspective, working with Pelican is a lot easier for me. As we are part of the charity, there are a lot of systems and processes that have been in place for many years. For example, we used to operate an old purchase order system with triplicates. The pink slip would go with the delivery, green slip with the invoice, white to the supplier. Our finance team had to stamp it all, sign it off, make sure correct information was included, add to a register, and then go to the office for processing. They would then manually add all the information on to the accounts system. The administration was just huge!
Streamlining back-office processes
With Pelican, their online Pi system was a big reason that swayed it for me at the outset. Now, with Pi, each head of department can log-in, order what they need, it is instantly reconciled. I tick a box at the end of the month and the invoice is paid.
I used to dread the end of month suppliers invoice payments; I would spend a full day manually checking everything – the office then spent a couple of days typing everything line by line in to Sage. Now it’s all there in Pi, everything has already been checked by Pelican e-Billing team and there’s one consolidated statement for all suppliers. Pi automatically uploads all data directly to Sage saving us significant administration time and costs.
Product management
There’s also a lot of value added support provided by Pelican that I didn’t necessarily realise would be available as part of the service, but which is extremely helpful. For example, Pelican arranged a series of tasting days as part of a tender process recently.
We were developing the café in our visitor centre and wanted to expand the coffee offering. Pelican went to the market and drew up a schedule of what we were looking for; this in itself saved me a huge amount of time. Five companies then came in to present to us. Pelican were with us and helped us make a decision. Ultimately the decision is with me – but it’s good to have a third party there to offer their expert view.
Product management is also overseen by Pelican. As an example, we used to use a local butcher for our meat. When we went to tender, although we like to support local suppliers, we still need value for money. Following the tender and sampling process, we selected a new butcher saving 18% in the process. As months progressed however, the quality of beef started to falter. Pelican picked this up and they were able to renegotiate with our original supplier, who was able to tighten up their costs – but importantly guarantee the quality of meat we were purchasing. Having the flexibility to move suppliers mid contract worked for us.
Next step is Stock Management
We’re coming up to the two-year mark since partnering with Pelican and will embark on another tender process. There are a number of factors that could affect the market – Brexit – plus the National Living Wage all has the potential to impact on our bottom line, so re-tendering is important to us to show our suppliers we are not being complacent with pricing and service levels.
Simon and the team are there every step of the process, making sure we have value for money and offering valuable advice. Even Pelican’s managing director visited us and spent a good deal of time with me, which I really appreciated. This is all backed-up by a fantastic modern online system that keeps ordering and invoicing in one simple place. Stock taking is next to happen on Pi and we’re looking forward to that going live.
In hindsight, making the decision to outsource my procurement was very wise, and one I would suggest others in similar shoes consider too. The financial savings are one thing, but the total assurance that suppliers are being well managed with no nasty pricing or supply surprises around the corner means I sleep much more soundly!”
