Hilton Worldwide quantifies product sustainability for global procurement operations

Making intelligent procurement decisions while enhancing the guest experience

Published on 30-Jan-2012

Validated on 02 Apr 2014

"IBM’s work provided a critical toolset for us to begin to make more educated, strategic choices about the products we buy." - Christopher Corpuel, Vice President of Sustainability, Hilton Worldwide

Customer:
Hilton Worldwide

Industry:
Travel & Transportation, Wholesale Distribution & Services

Deployment country:
United States

Solution:
Green/Sustainability, Operational Management, Optimizing IT, Product & Service Innovation, Supply Chain Management

Overview

Conrad N. Hilton began with a 40-room hotel in a small Texas town in 1919. Today, Hilton Worldwide is the world’s preeminent hospitality company, stretching across 24 time zones. The company’s vision is to fill the earth with the light and warmth of hospitality by being the first choice of hotel guests, team members and owners alike.

Business need:
Understand and quantify the business impact of factoring product sustainability into the hotel chain’s global procurement process

Solution:
Use technology and business intelligence to integrate sustainability into overall product quality and cost decisions

Benefits:
Hilton Worldwide acquires the ability to benchmark and compare existing products, analyze sustainability metrics, understand potential opportunities to drive overall bottom-line performance, and strengthen its relationship with suppliers

Case Study

Conrad N. Hilton began with a 40-room hotel in a small Texas town in 1919. Today, Hilton Worldwide is the world’s preeminent hospitality company, stretching across 24 time zones. The company’s vision is to fill the earth with the light and warmth of hospitality by being the first choice of hotel guests, team members and owners alike.

Since Hilton Worldwide brands touch thousands of communities and millions of people every day, the company is working to lead the industry by integrating sustainability as a business discipline that is focused on delivering great guest experiences and driving overall economic performance. To this end, LightStay, Hilton’s proprietary sustainability measurement system, is a brand standard across its portfolio of hotels and helps improve hotel performance and profitability while managing its global resource constraint. The LightStay system analyzes performance across 200 operational practices, such as housekeeping, paper-product usage, food waste, chemical storage, air quality and transportation. LightStay also provides a “meeting impact calculator” feature that calculates the sustainability impact of any meeting or conference held at a property. The LightStay system was the foundation of the company’s recent accomplishment of achieving ISO 9001 (quality) and 14001 (environment) for its entire portfolio of brands, making it one of the largest volume certifications of commercial buildings in history.

Searching for a measured approach to sustainability
Global businesses must operate in an increasingly resource-constrained world—while at the same time, a prevailing consumerist behavior encourages high demand and magnifies an already strong appetite for raw materials. The solution favored by some companies is to focus on, for example, conservation and use of recycled materials, or to buy those labeled as “green” or “sustainable,” but these efforts are only cursory, and are often not impactful, missing the complexities around a meaningful measured approach. If products made from recycled material cost more to make, use more energy to produce and must be replaced more often than nonrecycled goods, where is the value and the “sustainability” in those products? Organizations wanting to manage the economics of this resources constraint issue, while looking after consumers, need to search beyond strategies of buying and utilizing products based on a one-dimensional approach in order to determine the true value and cost of the materials and products they purchase across their supply chain.

Hilton Worldwide set out to integrate a measured and holistic approach to sustainability across its internal procurement organization while ensuring the highest and best-possible outcomes as it relates to the guest experience for its clients. The hospitality giant realized that calling itself “sustainable” would be meaningless if guests did not want to stay in its hotels because the recycled towels are rough, the rooms are cold, and “energy-efficient” kitchen appliances break down frequently or result in poor or inconsistent food quality for guests.

The global hotel chain realized that to integrate sustainability into its procurement processes, it must include:

· Transparent, formalized measurement and metrics of sustainability across the entire supply chain
· Focused product and process innovation emphasizing reduction of the overall total cost of ownership (TCO)
· Sustainability leadership with a focus on maintaining strong supplier partnerships

A procurement organization’s integral role in a company’s operations makes it the central touch point for all stakeholders, customers, suppliers, subcontractors and service providers to effectively collaborate and build sustainability across the entire supply chain. Once Hilton Worldwide had established a vision, the next step was to define the economics and metrics of sustainability. “We needed to think about sustainability as part of our overall procurement metrics. Sustainability is only one piece of the equation when deciding whether to purchase a product,” says Christopher Corpuel, vice president of sustainability at Hilton Worldwide.

This leading global hospitality company wanted to know what to measure (and how to measure it) when evaluating the sustainability of the thousands of products it purchases for its global hotel operations. A key to implementing more intelligent decision making and more comprehensive thinking about sustainability as part of the cost of a product was to be able to integrate the evaluation and costing process into the organization’s existing, proprietary LightStay system. Hilton Worldwide turned to IBM, a thought leader in sustainability, procurement and technology solutions to help it make the most educated, strategic decisions possible about the products it purchases, as well as show it how to integrate existing technology into an executable solution.

Integrating sustainability metrics into the procurement process
IBM worked with Hilton Worldwide to integrate sustainability into its procurement practices, supply management and technologies. IBM helped redefine Hilton Supply Management (HSM) processes, enabling Hilton Worldwide to collect and measure sustainability data and turn it into actionable information for procurement decision making. Consequently, Hilton is now able to capture sustainability metrics for a significant amount of the company’s spend. “IBM has helped us elevate our thinking about sustainability,” notes Corpuel. “Given the fact that we source finished products from around the globe, we needed to be able to look at the costs, revenue and equity associated with every product we buy, and manage sustainability in a measured, integrated way.”

Measurement is critical to integrating sustainability into any procurement organization. IBM Global Business Services worked closely with Hilton’s chief procurement officer and its chief sustainability officer to:

· Aid Hilton in building a comprehensive HSM procurement strategy that aligns with Hilton’s overall business objectives and focuses on integrating sustainability into Hilton’s procurement processes and supply chain
· Assist in developing a framework for sustainability measurements and metrics to support Hilton’s larger company objectives
· Understand existing efforts and programs in Hilton’s procurement supply chain organization that currently support larger company objectives
· Assess existing technology solutions as well as strategically support the design and execution of linking its existing supply management and sustainability systems
· Conduct process mapping of current state to future state in an effort to align strategy, processes and technology
· Identify issues, opportunities and constraints

IBM deliverables include:

· A process map detailing existing processes and aligning existing with new processes
· A metric “Lifecycle Assessment” framework to use with the products Hilton purchases
· A Statement of Operating Procedures that provides formal documentation to reference for steady state
· A total cost of ownership (TCO) tool to assist with sourcing decisions and product comparisons
· A module within the LightStay system that aggregates and disseminates sustainability data and information in a way that helps the procurement team make decisions around sustainability and TCO
· Training templates for suppliers and all stakeholders for efficient and quality data collection
· A learning and knowledge plan to ensure all knowledge is transferred to proper stakeholders and leveraged for success

Enhancing the guest experience while supporting sustainability objectives
Hilton Worldwide is fast becoming a best-in-class organization with regard to sustainability. This project is helping Hilton understand complex metrics and interconnections in a simplified manner while deepening its understanding across a range of opportunities including potential cost, efficiency and product innovations, enhanced guest experience, and overall economic value.

“IBM’s work provided a critical toolset for us to begin to make more educated, strategic choices about the products we buy,” states Corpuel. “Data now exists to make more effective decisions on procurement, with sustainability as one key piece of the procurement equation in terms of quality, cost and most critically, enhancing the guest experience.” While focused on sustainability measurement and metrics, IBM and Hilton Worldwide never lost sight of the importance of its guests. Says Corpuel, “A key card may be labeled ‘eco-friendly’ because it is made from bamboo, but if the card breaks or fails 30 percent of the time, that’s not a sustainable product for our business or our customers.”

As a result of this project, HSM and Hilton Worldwide brands and their properties will be able to:

· Benchmark and compare existing products, analyzing sustainability metrics as part of the TCO
· Assist their procurement professionals, brands and hotels to ask the right questions when looking at sustainability as part of their overall buy decisions
· Understand the economics and potential opportunities to drive overall bottom-line performance
· Strengthen their relationship with existing and future suppliers, which is critical to developing a shared understanding of the product life cycle

The company can manage global resource constraint while ultimately providing a better end product to consumers today without future negative impact—which at its core, is what sustainability is all about.

For more information
To learn more about IBM Global Business Services, contact your IBM representative or visit: ibm.com/gbs

Products and services used

IBM products and services that were used in this case study.

Service:
GBS SCM: Procurement, GBS SCM: Product Lifecycle Management, GBS SCM: Supply Chain Strategy, GBS Strategy and Change: Business Strategy, GBS Strategy and Change: Operations Strategy

Legal Information

© Copyright IBM Corporation 2012 IBM Global Services Route 100 Somers, NY 10589 Produced in the United States of America February 2012 IBM, the IBM logo, ibm.com and Global Business Services are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at “Copyright and trademark information” at: ibm.com/legal/copytrade.shtml This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.