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The Drive to Gain a Competitive Advantage

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June 18, 2018
Inventory Control
Jeremy Rock - Jrock@rockitgroup.com

A quick survey of the industry appears to indicate that there is a renewed interest in the use of inventory and procurement systems for hotels and resorts. These systems have become more affordable and there appears to be a significant increase in the adoption rate for both F&B and retail inventory systems. User interfaces have been streamlined and simplified to allow for ease of implementation and support. Some of the key factors associated with this increase in demand are outlined below.
Mobile Applications
In responding to industry demand, many application providers are focusing on mobile app development that can extend the functionality of their inventory and procurement systems. While the primary focus of the mobile apps has been on the recording of product inventories, other functionality is also being offered, including:
  • Manual adjustments
  • Transfers
  • Receiving
  • Item updates
  • Orders

The use of the apps allows for inventories and counts to be conducted on both a scheduled and ad hoc basis which leads to greater efficiencies and accurate inventory counts. These improvements in accuracy and efficiencies have some providers reporting ROIs in as little as three months, subsequently resulting in a high adoption rate for the mobile apps.
Most of the application providers are offering the apps on the two primary platforms Android™ and Apple® iOS. Additionally, depending on the operational protocols, they are being deployed with either property provided devices or as part of a BYOD program. Data security is a key focus for many organizations and many are using 2-factor authentication as a prerequisite for mobile applications. In many cases the data is encrypted, but given the generic nature of inventory data, many organizations are more concerned with accuracy than with security.
A Changing POS Landscape
POS applications are usually some of the most resilient hospitality systems and rarely experience volatility as it relates to their replacement and support. However, over the last few years the industry has experienced a great deal of activity around these system replacements. 
The main drivers of this activity have stemmed from the following:
  • Streamlining and consolidation of application offerings by leading providers
  • Data security issues with dated applications
  • The sunsetting of older applications
  • A move to cloud service applications
  • New applications entering the marketplace

The net result has been that inventory systems are challenged to ensure that applications can interface and integrate with the newer applications. To address this challenge, a renewed focus on the development of APIs has emerged. Some providers are reporting as much as 25 percent of research and development investment is in response to recent POS changes. 
Focus on API
A number of the industry inventory system providers are targeting the development of application interfaces to extend the functionality of their systems to other third-party applications. By making their APIs available it allows their customers to integrate to POS, purchase order and other ERP applications of choice. Given the current activity in the POS marketplace, it’s created an environment to replace these systems with limited-impact to the interface with the inventory systems. The changes also have limited-impact to the programming and cost of the applications.
Move to Cloud-based applications
As with other industry applications, there is a renewed focus on delivering applications via the cloud. Jay Livingood with Yellow Dog indicated that up to 80 percent of the company’s new deployments are being delivered via the hosted application offering. Not only does this limit the costs associated with provisioning servers and maintaining equipment on property, but it also provides for a more efficient support program.   
Some of the key reasons that there has been an increase in the demand for cloud and hosted applications include:
  • Visiblility from anywhere – user can access data from almost anywhere
  • Redundancy – a better fail-safe method that allows for enhanced uptime and data protection
  • Scalability – the application is easy to scale to meet the requirements for the operation
  • Cost savings – Limited up-front and maintenance costs
  • Greater efficiencies – better allocation of resources for application support 

Renewed Focus on Food Inventory
Understanding food costs and what contributes the most to the bottom line is critical in engineering menus – especially for banquet and catering departments. Too often the focus is on generating the largest dollar volume rather than what contributes the most to the bottom line. In competitive markets the user of food inventory systems can help drive efficiencies in these areas and help to yield the greatest bottom line revenues for these departments. For example, a surf and turf menu may generate the most revenue on a menu offering, but due to the high food cost, a chicken entree may yield the best profitability.
Data and Analytics Tools
One of the most overlooked advantages of an inventory system is the sophisticated reporting features allowing for a proactive approach to manage inventory items as well as products that contribute most to the bottom line. Among the key uses of an effective reporting solution are the following:
  • Identification and elimination of excess inventory storage 
  • Elimination of over-ordering of inventory
  • Identification of possible causes of waste and theft
  • Assistance with demand forecasting and sales
  • Identification of key lead times for re-ordering
  • Assistance with maintaining a just-in-time inventory supply
  • Assistance with the identification of excess and obsolete inventory

According to the 2017 Smart Decision Guide to Restaurant Management and POS Systems, 89 percent of restaurant operators cited a key success factor to be increased operational efficiency, including staff productivity and reducing inventory waste. One can expect most hospitality organizations to focus on the use of inventory and procurement systems to not only streamline operations but to also gain a competitive advantage. 

Blockchain Logistics

In the last year there has been a tremendous interest in blockchain and how this could impact the hospitality industry, with most of the focus being targeted toward payment and the use of cryptocurrencies. (See feature article in this edition, page 14.) With more than 30 years of industry experience, Ron Dressin outlined how RedRock Software is targeting the use of blockchain technology to address key concerns associated with a number of systems including food safety and logistics.

With blockchain you can track a product from production to consumption. “The trick is to be able to link into the logistics companies to be able to track the products and know where they are at all times,” Dressin said.  “While it’s great to link a procurement system to a supplier, the power is being able to identify where a product is at all times.” The technology can be applied to the tracking of hard and soft goods as well as food and beverage items. “Technically you can track a product from the production kitchen in a hotel back to where it was harvested,” he said. 
Logistics – Real-time Inventories
Essentially the goal is to track an order from the time it was placed to the time it is delivered and understand where it is at all times. Blockchain will provide the mechanism to facilitate this real-time tracking and integration of information to the purchase and supply systems.  
Food Safety
Many people in the industry may not be aware of how technology plays an important role ensuring that food is provisioned and stored according to regulatory requirements and is safe for consumption. From real-time tracking of temperature sensors to the length of time that the food is displayed, technology monitors the exposure of food to the environment. One of the key challenges is the tracking of tainted food and where it’s been distributed. In particular, it is essential to identify where tainted food originated and more importantly where it was sent. 
“For example, if you are involved with the centralized procurement of food and beverage items for a hospitality enterprise and you determine that there is an issue with a shipment of oysters sent to 30 properties, once the concern is identified there is an urgent need to get these oysters pulled from each location,” Dressin said. “With blockchain you could quickly identify which of the other properties were recipients of these oysters and have them pulled from preparation and consumption.”
Using blockchain companies can to take food safety to a new level.

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