Centralize, but give power to the people

A core item list helps consolidate the buy

Karen Prema -- Purchasing, 12/8/2005

A brainstorming session with management led Jim Gwinn, director of purchasing, Ocean Properties, to centralize office supplies buying for 130 locations in North America. After the meeting Gwinn and his team put together a core buying list that constitutes 80-90% of the company's office supplies purchases and consolidated the buy with one supplier. Ocean Properties builds and operates hotels including such big names as Marriott, Hilton, Holiday Inn, Sheraton and Westin. Procurement is centrally located in Portsmouth, N.H.

Late in 2001, the purchasing organization at Ocean Properties brought in upper management to discuss buying habits and products ordered at each individual property. The session lasted six weeks. "One of the things that quickly became clear was that the company was spending a lot of money on office supplies," says Gwinn. "Our U.S. properties were sourcing from up to 70 or 80 office supply companies."

Attacking the problem head on, Gwinn and his team developed a core list of product specifications using recommendations from some of its office supplies providers. Then, they sought input from their internal customers to determine the most popular items. "We did a bid and opened the business to just about every supplier," says Gwinn.

Starting with five office suppliers, "We looked at pricing and methods of ordering, and what we thought would be the best fit," he says. "At the time, our relationship with Staples was stronger than with some of the other suppliers. Pricing was close, but Staples won our business." Other reasons Ocean Properties selected Staples Contract Division include ease of ordering and willingness to work on the core list. The long-term contract is now nearly four years old.

At the first of the year, and after every three months, purchasing reviews the company's office supplies buy. Staples helped Ocean Properties identify a way of looking at the items each property orders. For instance, certain items on the core list appear in white. Office supplies not on the core list appear in blue. Products not considered office supplies, such as a refrigerator, appear in red. Reports identify which properties are buying items not on the core list so purchasing can stop them if necessary.

While purchasing works to keep the core list manageable, locations can put in requests to buy items not on it. Today, the list has 500 items, but purchasing is looking to decrease that to 400.

"Of course, we wanted to order office supplies online," says Gwinn. "It's the most efficient way for both Ocean Properties and Staples to do business." Requisitioners at each location place orders online for office supplies following requirements determined by the general manager of the property based on the core list.

"We want people to be able to operate their hotels," says Gwinn of the company's decision to let the properties use common sense when placing orders online for supplies. "We could put strict guidelines on what they're allowed to spend. But, it would create problems because we have such a diverse portfolio of properties."

Purchasing at Ocean Properties tracks Staples' delivery performance. The supplier promises one-day delivery to any location, accurate orders and 99.5% fill rates. Gwinn says it has few out-of-stocks and fewer shortages—and it offers rebates if it falls below a certain threshold of outages and shortages.

Recently, Ocean Properties started to purchase additional items through Staples including office furniture and storage files. In addition, the company now uses Staples as its sole supplier of toner. These moves caused additional growth rebates outlined in its contract to kick in.