Supply Chain Management in Hospitality Industry Modules

Name: ____________________________________________ Date Submitted: ____________

Module 4: Strategic Sourcing

Topic Overview:
This module discusses the topics on strategic sourcing. It is significant to a business to operate in
a collaborative manner. Strategic sourcing is organized because of the necessity of some
methodology or process, because apart from procurement the attempt of receiving operational
components is one of the most essential for its success. This make strategic sourcing collective.

Lesson Objectives:
At the end of the module, the student will be able to:
1. Articulate the Procurement Management
2. Relate to Common Issues on Purchasing
3. Realize the Strategies in Assessing Existing and New Hotel Supply
4. Explain the Process of Supplier Selection

Topic Outline:
A. Strategic Sourcing
B. Procurement Management
C. Common Issues on Purchasing
D. Assessing Existing and New Hotel Supply
E. Supplier Selection

DISCUSSION
Strategic Sourcing
Suppliers are selected
based on:
*capabilities
*compatibility w/ the
Business goals
It serves as the roadmap
to procure the goods and services
(to find the best price)
Supply Stability is ensured by
a stable supply relationship
(will not hurt the quality)
Risk Management, helps
reduce risks in the supply chain
and resolve potential problem quickly
Supply Chain Management in Hospitality Industry Modules
It can defined as a collective and organized
approach to supply chain management that
defines the way information is gathered and
used so that an organization can leverage
its consolidated purchasing power to find
the best possible values in the marketplace.
De Castro (2021)
Works Cited
De Castro, K. S. (2021). Supply Chain
management in Hospitality Industry.
Sta. Cruz, Manila: Edric Publishing
House.
Works Cited
De Castro, K. S. (2021). Supply Chain
management in Hospitality Industry.
Sta. Cruz, Manila: Edric Publishing
House.
 Supply Chain Management in Hospitality Industry Modules

Procurement Management
Success in hospitality is closely tied to procurement. All the purchased and used
equipment, materials and services have an impact on guest experience.

Source: https://kissflow.com/procurement-process/

TYPES OF PROCUREMENT:

1. Centralized Procurement –
It is centralized for product and service materials that require conformity and
compliance to standard operation procedure. The objective is to promote the
commonality of products used and services offered.

2. Decentralized Procurement –
Property level procurement will in-charge of the planning and acquisition of hotel
supplies as the department find appropriate and best suit to the designated
operation and condition.
 Supply Chain Management in Hospitality Industry Modules

Common Issues about Purchasing in Hospitality Industry

Adopted: (De Castro, 2021)

1. Blind Spot

Problem: Very few hospitality companies had visibility into their procurement
operations because purchasing data was simply not captured.

Solution: Since purchasing programs are so data-focused, joining one allowed

access to robust reporting and insightful data dashboards.

2. Limited Resources, Limited Rewards

Problem: Companies needed to constantly negotiate with vendors to get the

best price, but they often didn’t have the personnel for this resource-intensive
endeavor.

Solution: By combining the purchasing volume of many companies in one

collective, each business benefited by receiving the best possible price.

3. No Volume Control

Problem: A single hotel vs. chain, the company that is not growing gets hit with
double whammy: stagnant growth and static/ higher prices at a time when the
business can least afford it.

Solution: Hotels found that one of the advantages of a purchasing program is

that they could add other hospitality businesses to the collective in order to
procure a higher volume at a better price.

4. Order Disasters

Problem: MRO is not clear, for example, missing items and unapproved and an
often unwelcome substitutions occurred constantly.

Solution: Tying supplier compensation to accurate and efficient order fulfilment.

 Supply Chain Management in Hospitality Industry Modules

5. Communication Mishaps

Problem: Most suppliers are not in the business because they excel at
customer service and communication.

Solution: Purchasing program facilitates communication between vendors and

customers. This helped the customers better manage inventory.

6. Fear of Collaboration

Problem: Collaborating with competitors.

Solution: Executives must discern potential advantages and join the purchasing
programs.

7. Focusing on Weaknesses Instead of Strength

Problem: Procurement is not the line of expertise.

Solution: Saved money through the purchasing program must be spent training
employees in their areas of expertise for establishing brand.

Market Survey
Know what exists to assess the market, make a survey on hotels that are
competitive within the business strategy.

Include in the survey the following:

 Number of rooms *Function Space(Sq. Ft)
 Year Built * Year Last Renovated
 Quality/Brand (visit) *Star Rating
 Management Company *Owner/ Major Partners
 Chain Affiliation * Online reputation/review scores
 Financing Information *Price range and average rate
(lender, Loan Amount,
And Maturity date)
 Website (url, language, version)
 Supply Chain Management in Hospitality Industry Modules

Development Stages

1. Early Plan – Feasibility and Announcement

2. Planning – Preparation of Materials for government approval submission
3. Final Planning- government approval received and preparing construction
documents
4. Construction – active building and pre-opening activities
5. Opening – product launch and ramping up operations

Supplier Selection
1. Identifying the set of business goals and objectives
- for which suppliers are required.
- Goal- setting is important to measuring the success

2. Identifying criteria for supplier selection

- Standards for selection are based on the nature of business and
the supplier needs. (pricing, quality, industrial acceptance, legal standing)

Focus of the supplier

selection process Direct Appointment
Procurement Strategy
Lowest Price
Price Conforming

Purchaser
Price & nominated price
Delivery Model Quality
Price Quality

Quality
Quality based
(advanced)
 Supply Chain Management in Hospitality Industry Modules

3. Evaluating and Selecting Suppliers (proposal)

- on the basis of the defined criteria
- on the basis of quoted prices
- meet the business objectives

Supplier Selection and Evaluation

Recognize the need for supplier selection

Identify key sourcing requirements
Determine sourcing strategy
Identify potential supply sources
Limit suppliers in selection pool
Determine method of supplier evaluation and selection
Select supplier and reach agreement

4. Negotiating and Contracting with the selected supplier

- Carry out the procurement process to get them on board
- Engage all applicable parties
- Ensure how the deal optimized the benefits

5. Evaluating Supplier Performance

- A process that access new or existing supplier
(delivery, price, production, quality of management, technical and
services)
-the framework can help to set up a benchmark for corrective action plan
Decide to reward or penalize/delisting
_develop KPIs
 Supply Chain Management in Hospitality Industry Modules

EVALUATION

A quiz will be posted in the LMS. Wait for the teacher’s instruction.

References
De Castro, K. S. (2021). Supply Chain management in Hospitality Industry. Sta. Cruz, Manila: Edric
Publishing House.