Meanwhile, there have also been significant improvements in the back-office enterprise resource planning (ERP) space. While not nearly as sexy as improvements in guest-facing technology, these changes have brought about real productivity gains in many of the organization’s most mundane administrative tasks.
In the Fall 2023 Issue of Hospitality Upgrade, Mark Hoare and Mark Haley wrote an informative article titled “Shine a Light on ERP.” It included a comprehensive list of common modules that comprise a hospitality ERP solution. If you haven’t already please take a moment to read this article.
The list includes modules predominantly used in finance, HR, and purchasing. This line really caught my attention and prompted me to write this piece:“Keep in mind that these are a collective of modules and applications and rarely all come from a single vendor partner.”
A LACK OF SINGLE VENDORS
If you look outside hospitality, you can find numerous examples of singlevendor ERPs in use by large companies covering the entire spectrum of modules needed to run the business. Search for automotive ERPs or manufacturing ERPs and you’ll find several robust solutions specifically designed for that industry; each from a single vendor.
In a similar search for hospitality ERP, most results fall short of being a single-vendor solution to address the full back-office environment. Why is this the case in 2024? What is so unique about hospitality that we rely heavily on specific one-off solutions to accomplish a task that you’d think today’s ERPs could handle, so long as they have flexible configuration options?
It may simply be that hospitality, as a vertical market, hasn’t been a priority for large ERP providers. Many of their modules would require some level of modification to meet the demands of a typical hospitality enterprise. To accommodate those changes usually means enlisting the help of a value-added reseller (VAR) that specializes in hospitality and is an expert in the chosen ERP solution. It can be done, but at a cost.
The diagram on the next page is one I drew a few years ago. and illustrates my dream single-vendor solution. Additionally, there are related data streams important to areas such as marketing. Data from one application that’s needed in another application is freely shared through real-time application programming interfaces (APIs). This includes financial management applications, sometimes using data lake environments. All this data, including statistics, is available for planning and analytics (FP&A).
Last, but not least, this single-vendor solution would be the source for all reporting and archiving of critical information. Finding a single-vendor hospitality solution that covers all these needs is either impossible or outrageously expensive. If we rearrange back-office ERP modules into functional disciplines, it becomes apparent that we should consider the case for three separate ERPs:
- Finance: Accounting, project management, budgeting, financial reporting
- Human Resources: Talent acquisition, benefits administration, payroll
- Purchasing: Inventory management, COGS tracking, contracts, and purchase orders
This diagram I created a few years ago illustrates my dream single-vendor solution. Most applications fall into one of three categories: facilitate revenue generation and tracking, manage expenses, and manage financial reporting and critical administrative functions.
CHALLENGES UNIQUE TO HOSPITALITY
Let me explain a few key areas that often present a challenge to non-hospitality ERPs.
- C
- Finance
Finding the right finance ERP is the easiest of the three. Or maybe the hardest since most ERPs have financial functionality at their core and your list of choices would be extensive. Besides the common general ledger (GL), accounts payable (AP), and accounts receivable (AR) modules, today’s ERPs have incorporated flexible features for automated closing, treasury management, electronic procure-to-pay technology, and varying levels of analytics.
Looking for hospitality-centric finance ERPs usually means one that has Uniform System of Accounts for the Lodging Industry (USALI) classifications and reporting built into its standard offering. There are several vendors in this space, some of which have offered hospitality solutions for over 20 years. Budgeting modules for hospitality have grown in their complexity and allow line items to be metric driven off volume and price data from another source. With the correct focus on configuring these metrics, updates to budgets and forecasts have become streamlined and virtually pain-free.
The most critical feature to consider when selecting your finance ERP is the ease with which it handles data from other applications. In today’s API-rich environment, you should be able to move data from the front door to the boardroom without human intervention. Interfaces built around .csv and .txt files should be a thing of the past. Motivating this group of stakeholders to consider changing is never easy, but the advantages in newfound functionality may well be worth the pain. - IT'S PROBABLY BEEN A FEW YEARS SINCE YOU OBJECTIVELY CONSIDERED CHANGES TO THIS CRITICAL APPLICATION. Human Resources
The collection of ERP modules used in HR has often been referred to as a human resources information system (HRIS) or human capital management (HCM). Basic functions include tracking information about employees including key dates, compensation, training, benefits, and performance management. Additional modules in an HR ERP include time and attendance, payroll, and scheduling.
Recent enhancements to HR ERPs include tools that facilitate online job posting, recruitment, and onboarding. This has created an environment where a new hire directly provides all critical data. No longer does a staff member enter information from forms filled out during new-hire orientation.
Meeting the needs of a complex hospitality enterprise requires some form of labor-management as part of, or in addition to, the scheduling module. Hospitality has unique challenges, like staffing needs, that can change daily. Finding the right module to create metric-driven schedules based on business volume inputs are more prevalent today.
One common approach to addressing an HR ERP is to outsource payroll to a third party. You’d use its HR features and link to a separate solution for time and attendance combined with labor management and scheduling. If your operation isn’t complex, you may not have a justifiable need for labor management applications. - Purchasing
Purchasing-related modules, as a collection, often fall under the supply chain management heading. Operating departments often use this group of modules to manage inventories, cost of goods sold, and contractual purchase agreements and purchase orders. Again, depending on your operation's complexity, your feature requirements may differ.
If your business includes heavy food and beverage volumes, you’re also looking for modules that can interact with the point of sale (POS) system to track sales of items. This data, combined with electronic recipe cards, gives valuable insight to help managers optimize margins and identify potential inventory theft. These needs are similar for busy retail outlets. These tools have streamlined the ordering process through their ability to track real time product movement, combined with sales data, to determine replenishment levels. This includes acting on data received from the sales and catering system for upcoming events with specific menu needs. Purchasing ERP modules will often need direct links to the AP module of the finance ERP. This helps facilitate invoices from vendors with proper validation before payment. In some cases, these same modules can be configured to automate automatic clearing house (ACH) and credit card payments to vendors.
Maybe someday we’ll have a single-vendor, hospitality-centric, back-office ERP solution. Until then, there are many opportunities to update your back-office solutions for finance, HR, and purchasing. If you’re like many other hospitality enterprises, it’s probably been more than 10 years since you objectively considered changes to this often overlooked, but critical, set of applications.
