Constant communication between suppliers and operators has been among the key steps taken to manage through the current supply chain challenge.
Both operators and suppliers are also looking for and finding alternative products to overcome shortages, as well as trying to route supplies through alternative ports.
In this second installment about how to manage through the supply chain challenge, we discuss tactics and best practices. For yesterday’s report on the overall impact and outlook, click here.
Again, HOTELS talked to Carl Long, senior vice president, Purchasing Management International, Dallas, Texas; Chip McIntyre, senior vice president of Strategic Sourcing and Procurement, Avendra Group, Rockville, Maryland; Jerry Zeitner, COO, The Gettys Group Companies, Chicago; Chas Hyatt, vice president of acquisition and development and Erica Slaw, senior director of Capital Planning, Hersha Hospitality Trust, Philadelphia; as well as Shahid Javed, vice president and chief procurement officer for Aimbridge Hospitality, Plano, Texas.
HOTELS: What have you done to manage through (pivots, new ideas, new specs, etc.)?
Carl Long: We have worked very hard with our clients to develop sourcing strategies that minimize the delivery risk for their projects. This includes starting earlier on projects to give input on material specifications and production locations.
Early on in a design process, if we are working with the owner and interior designer to incorporate the sourcing strategy into how the specifications are written that translates to a better delivery outcome. We have also been fortunate to work with qualified interior design firms that know how to write a buyable, biddable specification.
The best way we have navigated these challenges is to stay connected in terms of communication. Our transparent communication to the owners, contractors, designers and manufacturers increases everyone’s commitment to creative problem solving and managing to successful deliveries.
Chip McIntyre: Helping customers with substitute products; getting the ‘normal’ items stocked and available. After the shut down last year, many products were “emptied out” of the supply chain. So, we have had to re-fill it.
We are also thinking creatively to find ‘work-arounds’ to the normal supply chain. For example, if a particular distributor is out of product in a geography, can we get it from another distributor? Or, is there a geography nearby that can help? Or, is there a substitute product our customer can use that will not create a negative impact on operations?
Jerry Zeitner: The immediate answer was to find North American manufacturers to counter act the freight problems. This has proved to be very difficult for several reasons:
- There are very limited North American manufacturers
- Pricing from North American manufacturers is significantly higher than Asian manufacturers creating great strain on budgets
- Since there are limited North American manufacturers (and everybody had the same idea) their factories are full and cannot take on new project work
- Many North American manufacturers use parts from Asia which creates similar issues on shipping
We have started routing Asian product into alternative ports. Most Asian product comes in through the West Coast of the U.S., but due to port backups we have started routing product in Houston, Savannah, etc. Although the product may be on the water longer, it can get processed a bit quicker.
We are also working with manufacturers that have multiple facilities throughout the world (Asia and Europe). Some production has been able to be shifted to Europe, which has provided some help but the container shortage is worldwide not just from Asia.
Erica Slaw: We’re working with a variety of new domestic vendors so we can at least remove ocean transit and port congestion risks. Domestic transit costs are inflated as well but with high container costs and the unreliable shipping timelines, domestic production is very attractive. We’re even finding some overseas vendors opening factories in Mexico and Central America as local alternatives to compete with domestic.
Depending on a renovation scope and the project risk, we’re also keeping a lot of existing product in storage during renovations in case we need to temporarily reuse existing, which is fairly easy to do in public areas but challenging for guestrooms. And, of course, we’re extending our pre-construction timelines three to six months to build in buffer for product and material delays that would impact business.
Shahid Javed: Aimbridge has identified additional sources of supply, proposed alternative products, identified domestic manufacturing capability and brought procurement closer to the spot of consumption.
H: What have been the challenges with specific goods, and how have you and your customers worked around it?
Long: Materials that incorporate finishes that are only available from Chinese sources have been a challenge. We have also run into fabrics that are no longer available because of their yarn supplier. In both instances, we worked with the designers and vendors to identify alternative ways to meet the same design goal. This requires extra time and attention from the project team to creatively come up with solutions.
Zeitner: The biggest challenge has been with case goods/furniture. Most of this production is in Asia, it’s large, heavy and takes up the most container space. We have been able to move some production to North America and Europe but that capacity is limited. We are also placing orders as early in the process (typically several months earlier than previously) to try and accommodate the shipping times.
Slaw: Lighting and outdoor furniture. Even with domestic lighting fabricators, so many parts still come from overseas and those overseas factories and shipping bring more timeline risk than domestic. Generally speaking, outdoor furniture continues to have the longest lead times I’m seeing on any category of products.
We’re being adaptable and either having designers reselect goods or planning on temporary furniture layouts, and in some cases temporary specifications until all goods deliver.
Tomorrow, HOTELS will publish the final installment of this series on procurement challenges by discussing what’s next, biggest learns, silver linings and more.