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Steven Henderson, Hilton Supply Management As senior director international field operations for Hilton Supply Management, Steven Henderson oversees purchasing overseas. Here’s how he does it. Friday, May 01, 2009 Beth Kormanik

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As senior director international field operations for Hilton Supply Management, Steven Henderson oversees purchasing everywhere outside the United States and Canada. That means he is on an airplane at least once a week visiting sites from Saudia Arabia, to France to Australia and all points in between.

Henderson also spends a lot of time with statistics: the average spend by property, the total by category for each property, which property has bought what products in the past day -- and why.

Henderson, a five-year Hilton veteran, is well-versed in the brand standards but also the cultural and legal nuances of the properties, which comes into play when deciding how to deal with an Egyptian ban on feather pillows because of avian flu, for example.

Henderson spoke with Buyer Interactive from his office in Watford, England.
 
In one sentence, tell me what you do.
I'm responsible for ensuring we have consistency in how we purchase, what we purchase and from whom we purchase everywhere outside of the U.S.
 
Which Hilton brands do you work with?
The whole family of brands. We're a bit different from States; the majority of our hotels outside of the States are owned, managed or leased. We have a lot less franchises, which obviously puts a totally different type of emphasis on how we're buying. We're buying on our own behalf or using owners' money. In the States if you're a franchised property, other than brand standards you don't have to use the Hilton purchasing system. It's an awful lot more line items and detail.

Hilton is a global brand, but every property is located in a unique setting. How do your purchasing decisions take local culture into account?
We have a two-pronged approach. Where we know there is a product that is fairly non-contentious, that's something we would source in a logical way. In the UK and Ireland we have 78 properties. Across the channel in Europe, we have 75 properties. That's 27 countries in a geographic area. It would be logical to source in a geographic area to companies that can deliver across it. We just did a deal on pouring champagne for that region. We cluster our properties to gain leverage. For independent hotels -- a hotel in Cameroon, for example -- they need to make 100 percent local purchasing decisions. We have a core of must-stock items. We will allow hotels to have their own local flavors around that. Or if they have their a specialty restaurant, they may need to make special purchases. We never say no as long as it's logical for commercial reasons.

Tell me about how you manage purchasing.
In the international portfolio, we've looked at where our hotels are and we've taken strategic decisions to concentrate on regions where we have the most properties, or regions where we have a central buying presence. Before we go into a country or a cluster of hotels, we analyze where they are purchasing from. We look at consolidation and when we look at where hotels should be buying from. We pre-load supplier details into [our system]. We were able to have one tool in the hotel that it could refer to for all pricing and all approved vendors. Without it, a hotel would have to phone a local procurement office or make unilateral decisions. Our hotels are then tasked to use that application for 100 percent of their operational spend. We will prevent hotels from creating new suppliers without approval from our corporate office. We can have an automatic alert to our central system asking us to approve that vendor before it goes live. It allows us to approve the supply base 100 percent. We can control any changes by preventing any hotels going off and doing the wrong thing and potentially buying off program or off contract. It becomes self-policing, which is a huge advantage for us.
 
How many items a month do you have to source?
We know we spend $750 million in the international arena annually on operating expenditures. We lock down the prices in the catalog, plus we negotiate the prices in them. It can be negotiated as a cost-plus, or a straight discount on the list. An engineering catalogue could have 20,000 line items in it. A food catalogue, there's probably 200 meat items we buy in the UK from a sole supplier.
 
What do you look for when you are deciding on new products to purchase?
First and foremost, we do work very closely with our colleagues. Let's take the example of a meat tender in the UK. We went to our F&B colleagues and said, 'What would you like us to source for you?' Our F&B colleagues go to the estates, take chefs, look at menus they developed, and came up with an authorized buying list of cuts of meats. Then we go to market with that. It's very important to remember that all of our other stakeholders in the hotel are our internal customers, especially F&B. A person will tell us what cut of meat we should be buying. We give our best advice on why we shouldn't have 10 different types of chicken breast, but at the end of the day if F&B says we need this particular chicken that's corn-fed from this farm, that's OK. That's how we work with our stakeholders. It's very much a partnership. We haven't got all the answers in purchasing, but we're best placed to make the negotiations and commercial decisions.

What qualities do you look for in suppliers you do business with?
We need to look more and more of the longevity of our supply base in terms of people we will be doing more business with on a long-term basis. The world is shrinking. Consolidation is a buzzword. Our position is to leverage our size and have fewer buyers but more purchasing. We're looking for suppliers that can service across regions, across borders. We're considering suppliers that can become distributors for us. By stripping out the cost of third parties, we can go directly to source. For meat, we can go to a slaughterhouse in Australia, specify lamb, and put in place a supply chain to deliver it around the world. The other thing is, yes, we're in business and need to make an honest living, but we do ask for suppliers more and more to be more open and operate on an open-book level with us. It's having a supplier not look at the percentage but at the cash he's getting from us.

What's the toughest item you can recall sourcing?
Being part of a brand, we are asked to support the sourcing of brand standard items. We were looking at a coffee-making facility. In the States you understand an in-room coffeemaker is something you put a packet into, brew and get a nice cup of coffee. In other countries, it's different. In the UK they expect a kettle because they drink more tea. In Japan people were trying to boil their noodles in it. When a brand puts in a brand standards, adapting it to the nuances of those cultures is quite challenging. We had something similar with our bedside radio alarm clocks. It sounds straightforward. We have these things made in China to our specifications. It should have been easy to get into countries, but some countries may have huge import duties on goods from China. That's our biggest challenge: trying to get total consistency across so many countries. There aren't many companies who can get you a consistent price across 63 counties. Each has its own customs laws. It gets quite complicated and silly. In Egypt you can't import feather pillows, because of avian flu. We have to use foam. These situations crop up very often. In Turkey, the government introduced a new sales tax. If we can get televisions imported quickly, we will save 6 to 7 percent off this sales tax. It's a very fluid market, which makes it difficult sometimes to be hard and fast.
 
What industry trends do you see emerging?
It will be more consolidation across borders. I was in Australia talking to one of the meat suppliers there and trying to negotiate a new contract. I found out he has an operation in Singapore and Shanghai. I got on the phone with our hotels there and put them in contact with him. If I can increase my business with that particular meat company, I can get a better price in Australia. That's what's going to be happening. There will be more joined-up thinking. It's about using less suppliers globally, but those suppliers will be able to ship across borders and service more of our hotels. There will be more consolidation of the supply chain itself and the use of distributors rather than going to wholesalers.

What’s the best piece of advice you can give to others that hold a similar job as you?
Have visibility. Find out exactly what is going on. I can go into my screen and tell you what a hotel in wherever -- France, Egypt, the Netherlands -- has bought today. I can do that now from my screen. That is power. Knowledge is power.