Independent, Luxury Resort & Casino – Supply Chain Optimization
Carpedia Hospitality was asked to explore various ways to enhance value through operational performance at our client’s trophy hotel asset on the Las Vegas Strip. The timing of the project was significant as it was just prior to the legislative increases in minimum wage and union obligations, so mitigating margin pressure was identified as key to generating value.
The first mandate was to implement a best-in-class labor management program, and during this work, it became apparent that there were additional opportunities for improvement within the resort’s supply chain. Our objective was to improve functional areas in order to optimize cash flow, develop control systems and alleviate the frustration that the on-property teams were experiencing as a result of disparate processes and the lack of inter-connected visibility to key performance indicators.
We observed that there were opportunities to remove redundancies, redefine workflows, and challenge current managerial behaviors in the resort’s procurement to payment cycle. We approached the program by observing and analyzing the procurement to payment cycle in detail and identified that the main bottlenecks were in purchasing, inventory control, legal contracting and accounts payable. We then worked alongside the on-property team to refine and streamline the processes and implement changes that drove productivity in these areas.
Resort management is now able to confidently and proactively manage their supply chain with more visibility and control gained from the management tools that were developed for the onsite team. After tracking the results for a year-and-a-half post project completion, the goals that were set at the beginning of the project were met by 117%. This translated into a 18% uplift in labor productivity within the supply chain stakeholders and contributed to a 16% increase in relevant daily cash float. Contributing to these improvements were:
- a reduction in the red tape required to make purchases;
- increased visibility and control to encourage purchases through preferred vendors;
- less unnecessary cash being tied up in inventory;
- economies of scale being taken advantage of across operating units;
- increased purchasing discounts being realized; and
- improved accounts payable cash management through enhancing visibility to payment terms.
“The changes that the team at Carpedia Hospitality implemented to our cycle were in line with our expectations. Upon completion of the project, the modifications to our systems and processes were embedded quickly into our business and the financial benefits were felt immediately. We are still realizing benefits as the management tools allow us to actively and visibly manage small refinements to the cycle that continue to provide a positive impact on our cash flow”. – CFO