We recently spoke with friend of the site and current SVP of Marketing and Product Strategy for Birchstreet, Sundar K., for a briefing that covered the history and progression of the company, how it engages its unique solution set to serve the hospitality and related industries, and some of its plans for the near future.
First Course: Birchstreet’s Backstory
In the world of procurement, there are very few solution providers that dominate an industry, but BirchStreet is one of those with a lead position in providing procure-to-pay (P2P) and expanded solutions to the hospitality industry. BirchStreet is a cloud-based P2P solution provider that was founded in 2002 when current CEO and Chairman, Sushil Garg took the code-line he received from the PurchasePro’s bankruptcy (Garg was an investor in the one-time high-flying software company). Garg saw an opportunity in the hospitality industry, but realized that he didn’t want to compete with group purchasing organizations (GPOs) and other software providers. He was fortunate to begin a collaborative relationship with Hilton that had been using the same PurchasePro code and was looking for a technology provider to manage, and ultimately, take it over; from there a commercial relationship was developed and BirchStreet has not looked back since, building out its solution footprint via development and acquisition and transforming into a cloud-based provider
Catering to a Unique Industry
The hospitality industry is a rather large pool of businesses that cater to a variety of wants and needs. It includes:
- Hotels and resorts (e.g., Hilton Hotels and Resorts)
- Casinos and gambling (e.g. Wynn Resorts)
- Bars and restaurants (e.g., TGI Fridays)
- Food manufacturing and culinary schools (e.g., Career Education Corporation)
- Airports (e.g., Delaware North)
- Sports and entertainment (e.g., Yard House)
- Clubs (e.g., ClubCorp)
- Healthcare (various hospital cafeterias)
For these industry leaders and across the hospitality sector, direct materials procurement is quite different than in many other industries in that these items are typically consumable and may have a short shelf-life. As such, it requires a different approach and incorporates a different supply chain altogether. Hospitality businesses, like restaurants, bars, and hotels, which frequently operate in a decentralized manner, need to have excellent visibility into current inventory levels of perishable goods, like produce, meat, and dairy, as well as highly-consumable commodities, like beer, wine, and liquor. Failing to properly manage the inventory levels of these ‘direct materials’ can have a significant on sales, reputation, and the overall customer.
Serving up P2P to Hospitality: BirchStreet’s Secret Sauce
During the course of our conversation with Sundar, he explained how BirchStreet supports its customer base of 250,000 users in 15,500 locations across 130 countries. BirchStreet users work with more than 400,000 suppliers and process roughly 10.6 million invoices and turn more than $15 billion in annual spend. The secret to its success lies in BirchStreet providing its user base with a cloud-based P2P system that serves the unique needs of direct materials procurement for the hospitality industry. Its platform provides general P2P capabilities, along with several tools to accommodate the hospitality industry. These features include:
- An eProcurement tool that automates the purchasing process to control for risks, like receiving errors, that can save enterprises between 5% and 7% of direct expenses, according to Sundar. After all, in the hospitality industry, receiving materials carries more financial risk because of the immediacy of their use.
- Accounts Payable (AP) Automation with three-way matching: in this industry with these spend categories, it’s important to match invoices with purchase orders and receipts. According to Sundar, BirchStreet’s AP automation/three-way matching capability helps organizations reduce invoice processing times by 70% while reducing invoice labor costs by up to 40%.
- Inventory Control and Beverage Management system: Hardly a P2P solution standard, this tool might be the most critical feature of BirchStreet’s platform, as it gives hospitality managers greater visibility into and control over premium inventory like food and beverages so that they can quickly understand what they have, don’t have, and need so they don’t run out.
- Recipes: this offers a bill-of-materials capability to let chefs understand costs of recipe components and enable them to price dishes appropriately and give visibility to consumers on things like calories, allergens, and food sensitivities.
- Sourcing and Contracts: these tools enable hospitality managers to find the best-fitting vendors to fulfill their needs and codify the resulting business agreements to safeguard both parties.
- Capital Projects: this feature enables organizations in the hospitality industry to fully utilize the BirchStreet solution by managing build outs, improvements, and renovations. With a sourcing component, it allows users to source both products and labor. With a budget management tool, it enables users to manage projects against budgets. And with a project management component, users can track the project’s progress by milestones.
- Electronic Payments: this forthcoming feature, dubbed BirchStreet pay, is said to be able to drive cost savings and efficiencies with 100% of electronic payment processing as the goal. Sundar tells us that BirchStreet’s plan also includes incorporating the use of virtual cards
Final Thoughts
BirchStreet is transforming itself to become a true cloud provider, and it has on its roadmap driving towards a more effective payment solution, and utilizing third-party partnerships to deliver payment and supplier enablement capabilities. Keep an eye out for BirchStreet in the coming months as they perfect their secret sauce while continuing to deliver for some of the hospitality world’s most recognizable brands.
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