Inflation-driven cost pressures. Geopolitical disruptions. Trade policies in a state of flux. Increasing incidence of natural disasters. Businesses have always struggled to manage their supply chains efficiently, but coming back from the pandemic is a hard-fought challenge in today’s new reality.
An efficient supply chain is a concern for every industry, but the hotel industry is particularly at risk. As a service business, disruptions complicate the mandate to consistently deliver quality service to guests. When bottlenecks create compromises, the cost can be financial and reputational.
The industry is working on various ways to optimize its supply chains. Loews Hotels and Co. has gone local and seasonal with its menus, thanks to sustainability-focused farmer and purveyor partnerships. Marriott’s “hybrid” procurement structure contracts centrally when global centralization makes sense. It contracts locally when that makes better business sense. Technology and automation are a given for supply chain optimization for concerns of every size.
While smaller players may not have the same deep resources to help smooth out their supply chain pains, they do share the same need to mitigating the risks. That starts with understanding the trends shaping the ecosystem and what strategies will best meet the challenges.
Four Key Trends and The Risks They Raise
Supply chains are in a growing state of flux, raising the challenges of effective risk management. Current influences include:
Nearshoring. International trade is being reshaped by the practice of outsourcing production to nearby countries. Mexico, for example, now outpaces China in importing to the U.S.–lower transportation costs being one driver of the trend.
Geopolitics. Policies in the U.S. and elsewhere aim to reduce dependency on China but make supply chain planning and costs more complex and uncertain.
Natural disasters. Whether earthquakes, hurricanes or wildfires, these are hugely disruptive to supply chains, including warehousing and overall logistics. Such disasters are growing in frequency and scope, requiring robust crisis planning.
Artifical intelligence (AI) integration. This is fast transforming all business operations, including supply chain management and logistics. The challenge is balancing the benefits like dynamic inventory management and predictive analytics to the risks like cybersecurity and regulatory compliance.
Three Strategies to Build Long-Term Supply Chain Sustainability
To ensure a competitive edge through its supply chain management, the lodging industry should look to several strategies.
Resilience planning matters. Preparation makes all the difference in managing supply disruptions. Backup options are a must. A well-defined, comprehensive resilience plan, developed in partnership with logistics experts, is key for proactively addressing all potential threats. The single largest disruptor to the supply chain today is global tariffs. How the global economy adapts will cause reverberations through many industries, hospitality included.
Tap into AI’s power. AI tools have extraordinary power to optimize supply chain inventory replenishment analysis to help determine insurance limits and coverage, better protecting companies against risks. It’s worth investigating the expanding range of solutions from companies Oracle and Microsoft that are incorporating AI in their supply chain platforms, to HUB, with a cross-industry solution focused on risk management.
Find the right partners to guide the way. There are numerous options, but insurance brokers with industry-specific supply chain expertise can be invaluable in the process. They should be on top of industry and organizational objectives and the supply chain pressures they face, but also capable of developing a customized and holistic program of supply chain insurance coverage.
Navigating the complex world of global trade during a time marked by uncertainty has never been so challenging. By marshalling the right resources to anticipate and effectively manage the risks, hotel companies will be better able to protect, if not optimize, their supply chains.
About the author
Kimberly Gore is the National Practice Leader of HUB International’s Hospitality Specialty Practice. She has over 30 years’ experience in the insurance industry with a specialization in hospitality and tourism clients. Kim is responsible for a strategic approach to carrier relationships, specialization and best in class service to benefit each client. Kim is an active member of the insurance community serving as president of IIABHGC and as a board member for IIABSC and was awarded the South Carolina Young Agent of the year in 2010.