Hilton Supply Management’s ability to find efficiencies allows it to be a

leading global supply chain solution provider. By Eric Slack

Few brands are as synonymous with hospitality as Hilton. Its legacy in the industry extends back
for nearly a century. Among the many important pieces of its legacy is Hilton Supply
Management (HSM), an organization that leverages the purchasing power of the Hilton
portfolio along with external hospitality brands to serve as an end-to-end global supply chain
solutions provider.
    “As a global procurement organization, we are focused on developing and executing on
programs and policies that serve the interests of properties and guests,” said Bill Kornegay,
senior vice president of supply management. “HSM is wholly owned by Hilton; we provide
goods and services for Hilton along with properties owned by independent owners, real estate
investment trusts (REITs) and management companies. We want to be the premier provider of
hospitality goods and services wherever we operate.”
    Just as Hilton has served the world’s travelers and set a gold standard for hotels around the
globe, HSM has created a gold standard for providing the global hospitality industry with
unique purchasing solutions and an operational mindset born from a rich heritage in hospitality.
Service and focused industry expertise are at the core of its business, which sets the
organization apart from purchasing generalists.
    The size of HSM’s customer base is staggering. Currently in the Hilton portfolio are 4,800-plus
properties across 13 brands in more than 100 countries. The brands include Hilton Hotels and
Resorts, Waldorf Astoria, Conrad, DoubleTree by Hilton, Embassy Suites, Hampton, Hilton
Garden Inn, Homewood Suites, Home2 Suites, Tru by Hilton, Canopy, Curio – A Collection by
Hilton and Hilton Grand Vacations. Additionally, Hilton has more than 1,700 properties in the
pipeline. Altogether, HSM supports supply chain management for 6,000-plus properties across
65 brands (13 Hilton along with 52 non-Hilton brands).
    “Success is predicated on the model we use to aggregate spend,” Kornegay says. “The more
goods and service we procure, the better leverage we have with manufacturers to procure
items at a low cost that we can pass on to our customers.”
    Today, HSM seeks to discover efficiencies in all aspects of the global supply chain, from
manufacturing through delivery, negotiating and securing value-based pricing with suppliers
and service providers that meet or exceed operational standards. Its proven pricing programs,
extensive procurement technologies and deep expertise in hospitality allow HSM to be a
strategic partner now and in the future for its clients.
    At a high level, the key challenges for HSM are centered on customer satisfaction while
working to drive profitability and sustain costs. These are the most pressing issues facing the
organization’s supply chain, logistics and strategic sourcing operations. The financial
management aspect is further challenged by market volatility and recovery cycles, which
impact manufacturing and distribution activities in particular.
    Business requirements are key to HSM’s sourcing activities, particularly with the expanding
footprint of new hotel construction, ensuring brand standards compliance and meeting
aggressive construction schedules. This coupled with the sourcing activities for established
properties drives the need for spend analysis to fully document what products are purchased
along with the quantities of those products. These are essential for the development and
management of a successful strategy.
    “HSM customizes our service based on the customer needs,” Kornegay says. “From reporting,
analytics, ordering options and targeted goods and services, we consistently grow our supply
chain and enhance the customer experience, allowing the properties to focus on their guests.”
    Building strong supplier and vendor ties is critical for HSM. It has dedicated team members
who manage each account relationship. “We strive to stay relevant and work with our suppliers
to ensure we are getting the best products for the best price, and we allow them to participate
in our discussions around what products we offer,” Kornegay says.
    About 10 percent of the vendors that HSM works with are considered strategic suppliers.
These include companies such as LG and the Coca-Cola Company. With that tier of supplier,
HSM has multi-year deals in place and works with the suppliers across the entire spectrum of its
hospitality portfolio.
    “The strategic suppliers represent nearly three quarters of our annual spend,” Kornegay says.
“We have commodity partners that are more localized, short-term contracts. We have several
partners in each category that allow us to fulfill different needs.”
Strategic Approach

Indeed, HSM’s services and solutions are extensive. They span the spectrum of strategic
sourcing, operations support, project supply management and business solutions.
    In the strategic sourcing realm, HSM has developed and negotiated global and regional
pricing agreements with hundreds of suppliers of hospitality products and services. This helps
to secure and offer their properties value-based pricing, superior products and the highest-
quality service standards through strategic sourcing solutions with reputable and responsible
supplier partnerships. HSM leverages the volume of its entire portfolio to secure best-in-class
pricing on all products and services, creating extraordinary value for the properties it serves.
    HSM’s food and beverage strategic sourcing team works closely with national and regional
food and beverage manufacturers to provide customers with an extensive offering of
consumable products, supplies and equipment. HSM provides superior pricing with a variety of
manufacturer programs for the food and beverage products required to successfully run a
property.
    Consumable programs include meat, poultry, seafood, grocery and dry goods, solid and
frozen dairy, bakery, produce, and alcoholic and non-alcoholic beverages. HSM also offers
equipment and supplies including china, glassware, flatware, kitchen equipment, banquet
equipment, large and small appliances, and other smallwares.
    Its food and beverage sourcing experts also provide an array of value-added services,
including a comprehensive food safety management program backed by an industry leader in
sanitation. This customizable program gives HSM’s clients the tools to maintain the highest
standards of cleanliness for the safety and health of guests, including employee food safety
training and regular audits to help identify and rectify any potential risks in safety practices.
    HSM’s project management service can also help with turnkey kitchen projects. These
services include design planning, identifying and specifying equipment, procurement, logistics
and installation. Leveraging its strategic relationships with food and beverage equipment
manufacturers and installers allows HSM to provide competitive prices on the products needed
to complete kitchen construction, renovation or replenishment.
    Beyond food and beverage, HSM’s strategic sourcing capabilities extend into guest rooms and
public spaces, property operations, energy management, and sustainability and responsible
sourcing. If clients are looking for items for guest rooms or furniture for their lobbies, HSM’s
programs can handle all requirements, including products for ongoing operations and
renovations.
    HSM supports operating supplies and equipment needs through uniforms, linens and terry,
and amenities and pet programs. Its furniture, fixtures and equipment (FF&E) offerings include
casegoods, upholstery, flooring, window treatments and indoor/outdoor furniture.
    Additionally, HSM’s property operations strategic sourcing team offers an extensive range of
negotiated products and services to keep all the operating areas of a property running
smoothly. Its supplier agreements include maintenance repair and operations (MRO), service
agreements and print and promotional items. MRO equipment and supplies include tools and
hardware, electronics, RFID door locks, safes, plumbing and paint, signage, vehicles and vehicle
wraps.
    HSM also provides service agreements in areas such as pest elimination, water treatment, TV
content, gateway and security, elevator maintenance, public space cleaning, temporary labor
and third shift, scenting and clean air, roofing, public space music and on-hold messaging, and
waste management. It can assist with print and promotional items such as key cards, logo food
and beverage disposables, logo apparel, in-room collateral, on-property marketing materials,
business cards, stationary and more.
    In the energy management arena, HSM manages the purchasing of electricity and natural gas
in regulated and deregulated markets, in addition to providing renewable energy and related
utilities programs for its properties. In support of Hilton’s commitment to corporate
responsibility, HSM offers programs for efficiently reducing the cost and carbon footprint
associated with the consumption of required utilities, and it can manage supplier relations for
purchasing energy-related hotel services and products. Its energy procurement services include
electricity, natural gas, steam, alternative renewable energy, utility bill pay, and energy audits
and management services. Energy products include HVAC, PTAC, thermostats, lighting controls,
electrical supplies, electric vehicle charging and building automation systems.
    Then there is sustainability and responsible sourcing. HSM is committed to driving a global
sustainable procurement strategy that takes into account the environmental, social and
economic impacts and benefits to its properties. Through its strategic partnerships and
sustainability initiatives, HSM develops and implements programs that enable properties to
divert waste from landfills and reduce water and energy usage.
    HSM manages a complex supply chain and engages with business partners who are
committed to delivering products and services responsibly. Its responsible sourcing policy
outlines the fundamental principles, environmental, social and economic, that are expected of
all suppliers, regardless of their region. HSM’s sustainability and recycling programs include
mattress and TV recycling, universal waste recycling, synthetic turf landscaping and food
digesters.
Supporting Operations
HSM’s operations support team has extensive experience in managing all areas of hotel
purchasing. This experienced leadership combined with a regional presence in the field ensures
that HSM can leverage opportunities to supply solutions by providing unparalleled service and
procurement expertise to client operations.
    Customer service is a critical part of this effort. Because HSM comes from the world of
hospitality, it understands that unparalleled customer service and support are critical to help
customers deliver service excellence. Its team of supply management professionals will ensure
that client needs will be handled with the utmost attention and care from start to finish.
    HSM has a regional operations support model which aligns dedicated individuals to the
properties in their regions, providing consistent, personalized service accentuated with market-
specific knowledge. Located in major markets worldwide, HSM’s professional and
knowledgeable operations support teams are the first line of service for questions,
consultations or issue resolution. Thanks to their practical hotel experience, HSM’s field
operations teams add value with meaningful insights and advice to increase efficiencies.
    Beyond that are HSM’s regional commodity programs, which are groups of specialized
supplier programs that have been negotiated for commodity suppliers in each metropolitan
area. Using a best-in-class approach where the market volume can sustain multiple suppliers,
pricing is negotiated by supplier category. This gives clients a degree of flexibility in purchasing
the freshest quality products with consistency in product and price from the strongest suppliers
in their market or region.
    HSM’s regional distribution programs are another important element, as they leverage the
purchase volume of properties within or across regions and/or categories to reduce base
product costs for participating properties. By driving economies of scale, HSM is able to
negotiate powerful savings with distribution partners covering an expanded geographic scope.
    The organization’s distribution programs produce improved productivity and cost reductions,
while providing the flexibility to customize solutions for individual markets and properties. If
needed, HSM can further leverage the effectiveness of its regional distribution program
relationships with a strategic category management program, working closely with the
distributors on tactical SKU rationalization and manufacturer consolidation to achieve even
greater category savings impact.
Project Oversight
Project supply management is one more area where HSM delivers unparalleled service to hotel
owners and developers. Its hospitality focused teams will help clients to complete new hotel
builds or existing hotel renovations on time and within budget. HSM manage all aspects of the
purchasing process for every aspect of new builds or renovations.
    HSM’s project development team works with renowned designers and owners to refine and
execute their exclusive packages, providing estimates for renovations or new build projects.
This customized service provides owners and developers the necessary tools and information
needed to get a project underway including budget scope of work, critical path timelines,
financing and leasing options.
    Its project supply management team can manage the entire FF&E purchasing process for
every area of a property including guest rooms and corridors, lobbies, restaurants, lounges,
meeting rooms, pool and patio areas, laundries, administrative offices, business centers, fitness
centers, back-of-house, administrative areas and interior signage. HSM’s project supply
management and logistics team also helps to ensure that projects are completed on budget, on
time and to a client’s total satisfaction. The team works closely with general managers, owners
and developers throughout the entire project process to help ensure success.
    HSM tracks projects using a proprietary project supply management software program that
tracks each project’s process including budgets, pricing, expediting, delivery, reporting and
analytics, from inception through completion. The comprehensive project management
services include everything from competitive bid processes for project items, a dedicated single
source contact, regular project updates, model room build-out experience and assistance with
designer contacts to pre-screened contacts for installation and warehousing management, pre-
approval of any changes prior to purchasing, product improvement plan (PIP) assistance, post-
project assistance, freight consolidation, claims assistance, expediting and logistics
management and freight management services.
    HSM also offers guest room design packages for the newest brand, Tru by Hilton, and it is
presently developing brand-specific and endorsed packages for multiple other flags within the
Hilton Worldwide portfolio. HSM’s guest room packages allow the organization to deliver
customization, functionality and value for clients along with all-inclusive décor schemes for the
comfort of their guests. It works closely with reputable manufacturers to ensure that the
products and specifications are custom-tailored to a brand’s specific standards, and its brand-
approved guest room packages have been extensively tested in real hotel environments to
ensure their functionality and durability.
    “We work very closely with our business partners in all of our brands, and as they develop
new concepts they work with us and our supply partners to determine the products they need
and build them into the concept,” Kornegay says. “Within each category, we can look at what
format works best and how it differentiates the brands while working within a framework that
our suppliers can accommodate.”
Extensive Solutions
Another benefit of working with HSM is its eProcurement system, which simplifies the
purchasing process. HSM deploys business-to-business applications across its portfolio of
brands and ordering disciplines, providing properties with significant increases in system
functionality and access to scalable solutions for each property’s requirements. HSM’s
eProcurement catalogs contain products representing its many negotiated spend classifications.
These include food and beverage, FF&E, services, printing, uniforms, maintenance repair,
operating supplies and equipment.
    System users at the executive and property levels can benefit from the convenience of
integrated declining checkbook features and electronic approvals processes. HSM can
customize the eProcurement system to meet the unique needs of each property and provide
various service and support levels to ensure efficient adoption of the system. By delivering
technologically advanced support and resources, HSM helps clients have easy access to current
information about their purchasing operations.
    HSM is also launching a customer portal in 2017. As part of its ongoing effort to deliver
technologically advanced support and resources to customers, creating the HSM Customer
Portal will provide access to the latest information about purchasing operations and the
resources needed to manage it. This technology will be exclusive to HSM customers and offers
features that will change the way clients operate. These features will include self-service
reporting, integrated dashboard analytics, searchable product and program details, instant
access to supplier contact information, estimator tools, alerts and updates and a mobile-
friendly design.
    “When we look at the trends impacting our business, it is all about big data and the desire for
more information while providing it in user friendly formats for customers,” Kornegay says.
“We must be able to provide them with as much information as we can when they need it and
how they need it. That is why providing them with a portal through a customer facing website is
important, as it can help them to understand spend at company, property and category levels.
It will also help us to communicate regularly with them about updates, upgrades and changes
and allow them to see their spend data and analyze that information.”
    In the coming years, HSM will continue to serve its clients, those within Hilton and beyond.
Hilton is in the midst of spinning off its real estate and timeshare businesses into standalone
companies, and the Hilton family will become: Hilton, Park Hotels & Resorts and Hilton Grand
Vacations.
    “Our business model will work the same way after the spinoff,” Kornegay says. “We will
provide goods and services for their properties as a third-party provider. There will be a need
for us to make sure our contracts are more robust and put them in place with the new entities,
but what we do and how we do it won’t change.”
    Within the hospitality procurement sector, there has been consolidation in many categories,
and that consolidation is driving competition. HSM will continue to provide the best-in-class
service by focusing its efforts within its development group, actively engaging external parties
so it can get its goods and services to market.
    “Historically, we’ve leverage the Hilton relationship to drive our growth, but now we must
compete more actively for the pool of business in response to consolidation,” Kornegay says.
“Our key investments will be in our ability to communicate information to our business
partners, customers and suppliers. Big data and consolidation in the industry are the trends,
and there is more fierce competition that is driving our thinking going forward. We must also
always invest in our people to make sure we have the best and brightest on our team, give
them the training they need to succeed.”