BirchStreet: A hyper-growth phase for the hospitality Procure-to-Pay (P2P) defacto standard
Over the past 17 years, BirchStreet Systems has emerged as the leading provider of Procure-to-Pay (P2P) solutions for enterprises operating in the hospitality space. P2P is comprised of solutions which automate procurement, accounts payable, invoice & payment processing, inventory management, recipe management and capital expense management. These solutions can deliver up to 20%-50% back office and food and beverage cost reduction, and achieve over 80% on-contract spend compliance rates, improving rebate capture. With best-of-breed solutions and strong value proposition, BirchStreet is poised to enter its next phase of expansion. “We're really entering into a hyper-growth phase,” says CEO Steve Markle. BirchStreet counts such premium hotel brands as Marriott, Hilton, Hyatt, Accor, and Four Seasons among the enterprise-wide users of its suite of SaaS on-demand solutions. Markle continues, “having captured most of the major global hotel brands, and a large percentage of the large hotel management companies as enterprise customers, BirchStreet is preparing to scale its operations dramatically. We grew in excess of 40% in the last year and can see that growth trajectory continuing for the foreseeable future as we deploy into our customers’ property portfolios, grow alongside our rapidly expanding customer base and acquire additional large enterprise customers. Moreover, we have our sights on growing the company by many multiples in the next few years.” Following two years as BirchStreet COO, Markle, has served as CEO of BirchStreet since July 2018. In our sit-down session, Markle outlines an ambitious plan to match the company’s bold, dramatic growth targets, sharing his vision for BirchStreet’s continuing transformation into a diverse and disruptive global organization.
“There are three major vectors of growth that put BirchStreet into context,” explains Markle. “First, we are more deeply penetrating our traditional hospitality industries, as well as entering new industries that are similar because of the adjacent Food & Beverage and direct goods categories that they share.” Second, BirchStreet is rapidly expanding its footprint in new geographies through its existing customer base of global brands and an enhanced international selling organization. “Our third growth vector is the new suite of products we have recently developed in our roadmap, which is really exciting,” he continues. “These solutions go way beyond traditional e-procurement.”
These three elements of BirchStreet’s transformation and growth journey are best illustrated by one of the company’s newest clients, Wynn Resorts. “Working closely with Wynn over the past year, we are quickly approaching their goal of becoming truly paperless,” says Markle. “Having recently gone fully live on BirchStreet, Wynn is not only automating its P2P processes, but is also utilizing nearly every tool that we have to eliminate paper. Like we did by working with the leaders in the hotel space in our early years, Wynn has partnered with us as an early adopter to create state-of-the-art solutions for the gaming industry. Innovation through collaboration has been the hallmark of BirchStreet’s development from our earliest days as a transformative company”, he explains.
This new partnership is allowing BirchStreet to further its penetration of the hotel and hospitality vertical. Furthermore, it demonstrates that BirchStreet is making a decisive entrance into the gaming, restaurant, managed foodservice and sports & entertainment events spaces, evidenced by customers such as Levy Restaurants and Delaware North. The company is also launching a host of new products in order to smooth and improve the operating processes of a world-leading institutional food service brand.
Better serving long-time customers
Over the past 17 years, BirchStreet has continuously sharpened its ability to increase spend visibility & control and operational efficiency to significantly cut costs for its clients in the hotel space. This singular focus on reducing the cost of procuring from and settling with their suppliers has resulted in BirchStreet capturing the 14,000 businesses that it now claims as its customers. BirchStreet’s importance was cited by AccorHotels CPO Sebastien Brunel in a recent interview with Business Chief. “BirchStreet brings structure to our process. We have PO approval process, PO management, inventory management, product management and (electronic) interaction between (our) hotels and (their) suppliers. This is essential for AccorHotels, especially in North America,” he explained. “We have been partnered with BirchStreet for 10 years; they’ve always supported us in everything we’ve done and the platform brings efficiency, good savings and automatic updates to inventory – we probably do around US$150mn of annual spend through the BirchStreet platform.”
Elaborating further on the value that BirchStreet brings to its customers, Markle says, “There are three big sources of economic value that BirchStreet brings to these organizations besides increased efficiency. The first big driver is spend control which enables big savings by allowing their operations to go through a controlled online buying experience that ensures the properties are buying the right goods, from the right supplier, at the right price.” Second is the prevention of risks like maverick or off-contract buying, and third, BirchStreet’s platform creates value for its customers on the revenue side. “You can increase revenue with us by having tight and efficient controls over your inventories so that you never miss an opportunity to make a sale,” Markle explains. “Suppliers offer rebates and allowances if you achieve certain spend levels with them. Our system automatically tracks all of the spend with each supplier so that the customer can easily capture the rebates and allowances they earn. Given annual spend size of our large enterprise customers, rebates and allowances add up to big dollars. Our value proposition is amplified when our solution is coupled with a Group Purchasing Organization (GPO) like the one offered by our key partners at Hilton Supply Management” (HSM), says Markle. “With HSM, BirchStreet can approach customers in any of their target industries or geographies with a seamlessly integrated offering combining P2P technology and supply chain programs”
A specific example of how BirchStreet is better serving its existing customer base, while also aggressively expanding into new markets, is the adoption of innovative new products that greatly enhance the efficiency of its customers’ operations. According to Markle, from its earliest days BirchStreet’s focus on the P2P function within the hospitality industry has defined the development of its software platform. “We recognized early on that the large ERP software companies are excellent at meeting generic enterprise management software system needs. But with its emphasis on food & beverage and other items consumed in delivering its ‘product’, or what we call ‘direct goods’, hospitality has very specific needs that were not being met. There are numerous “pain points” in the P2P process that are specific to hospitality and BirchStreet is uniquely positioned to address those needs. We integrate with all the major ERP systems thereby completing the full ERP functionality required by our large enterprise customers”.
“Two years ago, we acquired AccuBar, a best-in-class, specialist solution provider, for businesses that handle beverage inventory,” says Markle. Since acquiring AccuBar, BirchStreet has combined both companies’ capabilities to create a single inventory management solution for food and beverage organizations. “It’s very slick,” Markle says. “It has mobile capabilities that allow you to receive goods with your mobile device when it reaches your dock. This is a critical part of the process that enables flow-through automation from receipt to pay. In addition to promoting accuracy in the receiving process, it saves a huge amount of time versus writing things down by hand and then entering data into your accounting system.” Another example is BirchStreet’s investment in infrastructure for global scale. All of BirchStreet’s customer transactional data runs on Oracle databases. By leveraging Oracle’s technology, BirchStreet is able to host more than 2mn logins per month while maintaining a 99.9% uptime. BirchStreet also embeds Softlinx services to send over 50,000 fax pages per month on behalf of its customers to the corners of the globe without internet. By switching to Softlinx in late 2017, BirchStreet increased its worldwide success rate by 20%. And through BirchStreet’s partnership with CapGemini, the pair offers Accounts Payable as a Service (ApaaS) to joint customers such as FourSeasons. APaaS is a fully standardized and automated business process for end-to-end invoice process.
In addition to automating the goods receiving process, BirchStreet provides its customers with a patented specialized inventory function. “The service’s unmatched take-inventory capabilities allow you to grab a bottle of liquor and wave it in front of your mobile device,” Markle elaborates. “Our mobile app will recognize the shape of the bottle and branding and allows you to take inventory, including partial bottle inventory by moving the fill-line on the bottle image that automatically appears on your mobile screen. Think of the more expensive scotches, or a bottle of Remy Martin Louis XIII Cognac and you quickly understand the power of this quick, easy and accurate inventory management tool. You potentially have a lot of capital locked up in beverage inventory, particularly when you consider the final selling price per pour.” Expanding further on this proprietary technology, Markle continues: “Once you have the contour of the bottle saved to the system – and some weirdly shaped bottles are hard to calculate by eye – our patented technology always recognises the shape of the bottle. All you do is swipe your finger where the liquid line is and it’ll automatically calculate how much volume you have.” Markle maintains that BirchStreet’s inventory software has the potential to revolutionize waste mitigation in high-value beverage management.
Responding to the needs of its institutional food services clients, the company is also introducing innovative software to help its food production operations track stock and ensure standards of service across multi-location operations. “For managed food service companies, we’re also introducing our recipe and production kitchen modules,” says Markle. “Think about how many recipes a large casino or hotel must have and the process of making and distributing finished goods to their outlets. Our solution helps restaurants manage recipes and ingredients, as well as food costs, which is the Holy Grail for business owners and chefs. Then, if you combine recipes with inventory, our solution will implement automatic stock replenishment notifications or fulfilment of that inventory item depending on the recipes you produce. Just think of the labor savings from automating that aspect of food services operations. If you think about a high-end casino property, you think of shops on the first floor where they’re selling a wide range of items. Working with our customers has allowed us to create a retail inventory extension of our inventory module functionality,” says Markle.
New markets, new regions
BirchStreet’s new suite of products are allowing the company to aggressively penetrate adjacent or nearby industries. Furthermore, its deeper penetration into the multi-national hotel management sector is allowing the company to explore new regions, where it also hopes to attract a new roster of clients. “We’re making a very large bet on Europe, the Middle East and Asia,” says Markle. “By all indications it will be wildly successful. There are lots of companies within both our old and new industries that operate outside BirchStreet’s traditional market of North America.”
As BirchStreet breaks into new sectors and brings new offerings to new and old customers, Markle reflects on his own schedule. “I’m traveling around the world three or four times a year,” he says. “I’m about to do an around the world trip, starting in early March. I’ll just keep going East until I wind up back in California.” Markle holds town halls with employees in every BirchStreet office to keep the company engaged and updated on the next stages of its development. “Change is constant, and you manage change by making sure your organization knows where it’s going and embraces the enthusiasm of its leaders.”
On the subject of BirchStreet’s legacy as well as his own, Markle muses: “We look at our industry of hospitality as we would any business that provides a ‘product’. Our customers are enterprises that manage multiple facilities that deliver a wide spectrum of services that make up their ‘product’. The hospitality ‘product’ is effectively made up of parts and labor. We partner with our customers in multiple ways to significantly reduce their labor costs and increase sales. We do this through automating a whole host of manual processes from procuring to paying for the goods they use at their properties day in and day out, and we provide the tools needed to better manage the ‘parts’ used in their food and beverage operations, as well as in the rest of the customer experience. In the end, that is what hospitality is all about: the experience. We wake up every day asking ourselves, ‘what can we do to help our customers deliver the best experience possible at their properties?’ By virtue of what we do, we help our customers to take a fresh look at themselves and evaluate whether their processes and internal capabilities fit their vision for where they want to go as an organization. Our approach is not to be prescriptive, but rather to work closely with our customers and innovate together.”
Markle concludes: “What we do is not just about deploying our software; it’s about working with our customers to provide the tools and expertise they need to deliver their desired outcomes: the very best experience to their customers, while using technology to minimize the costs of delivering their product. We could not be more proud of what we have achieved over the past 15 years and couldn’t be more excited about what the future has in store for us as we innovate with our customers to transform the worldwide hospitality industry.”