PE 3

Badminton

Definition of Badminton
• Badminton is a racquet sport played using racquets
to hit a shuttlecock across a net. Although it may be
played with larger teams, the most common forms of the
game are “singles” (with one player per side) and
“doubles” (with two player per side).
History of Badminton
• Games employing shuttlecocks have been played for
centuries across Eurasia, but the modern game of
badminton developed in the mid-19th century among
the British as a variant of the earlier game of batteldore
and shuttlecock.
• Early on, the game was also known as Poona or
Poonah after the Garrison town of Pune, where it was
particularly popular and where the first rules fir the game
were drawn up in 1875.
• By 1875, officers returning home had started a
badminton club and initially the sport was played with
sides ranging from 1 to 4 players, but was quickly
established that games between 2 or 4 competitors
worked best.
• The sports was played under the Pune rules until
1887, when J. H.E. Hart of the Bath Badminton Club drew
up revised regulations. In 1890, Hart and Bagnel Wild
again revised the rules.
• The Badminton Association of England (BAE)
published these rules in 1893 and officially launched the
sport at a house called “dunbar”. The BAE started the
first badminton competition, the All England Open
Badminton Championships for gentlemen’s doubles,
ladies’ doubles, and mixed doubles, in 1899. Single
competitions were added in 1900 and an England-Ireland
championship match appeared in 1904
• England, Scotland, Wales, Canada, Denmark, France,
Ireland, the Netherlands, and New Zealand were the
founding members of the International Badminton
Federation in 1934, now knows as the Badminton World
Federation (BWF).
• BWF now governs international badminton.
Although initiated in England, competitive men’s
badminton has traditionally been dominated in Europe
by Denmark. Worldwide, Asian nations have become
dominant in international like China, India, Indonesia,
Malaysia and South Korea.

Badminton in the Philippines

• In Philippines, it was in the 1920 when British and
American expatriates introduced badminton in the
country.
• As early as 1950's, the International Badminton
Federation (IBF) recognized the Philippines as its 21st
member country.
• In 1952, the Philippine Badminton Association (PBA)
was created and became the first national badminton
group, organized by 28 badminton clubs.
• In 1981, the Philippine badminton team participated
in the Southeast Asian (SEA) games.

Rules in Badminton
• The court is rectangular and divided into halves by a
net. Courts are usually marked for both singles and
doubles play, although badminton rules permit a court to
be marked for singles only.
• The doubles court is wider than the singles court,
but both are of same length. The exception, which often
causes confusion to newer players, is that the doubles
court has a shorter serve-length dimension.
• The full width of the court is 6.1 meters (20 ft) and in
singles this width is reduced to 5.18 meters (17 ft). The
full length of the court is 13.4 meters (44 ft).
• The service courts are marked by a centre line
dividing the width of the court, by a short service line at a
distance of 1.98 meters (6 ft 6 inch) from the net, and by
the outer and back boundaries.

• In doubles, the service court is also marked by a long

service line,which is o.76 meters (2 ft 6 inch) from the
back boundary.
• The net is 1.55 meters (5 ft 1 inch) high at the edges
and 1.524 meters (5 ft) high in the center.
• The minimum height for the ceiling above the court
is not mentioned in the Laws of Badminton. Nonetheless,
a badminton court will not be suitable if the ceiling is
likely to be hit on a high serve.
Rules: Serving
• When the server serves, the shuttlecock must pass
over the short service line on the opponents’ court or it
will count as a fault.
• At the start of the rally, the server and receiver stand
diagonally opposite service courts. The server hits the
shuttlecock so that it would land in the receiver’s service
court.
• This is similar to tennis, except that a badminton
serve must be hit below waist height and with the
racquet shaft pointing downwards, the shuttlecock is not
allowed to bounce and in badminton, the players stand
inside their service courts unlike tennis.
• When the serving side loses a rally, the serve
immediately passes to their opponent(s).
• In singles, the server stands in their right service
court when their score is even, and in her/his left service
court when her/his score is odd.
• In doubles, if the serving side wins a rally, the same
player continues to serve, but he/she changes service
courts so that she/he serves to a different opponent each
time.
• Same as singles if the opponents win the rally with
an even score, the player in the right service court
serves; if odd, the player in the left service court serves.
• The players’ service courts are determined by their
positions at the start of the previous rally, not by where
they where standing at the end of the rally.
• A consequence of this system is that, each time a
side regains the service, the server will be the player who
did not serve last time.
Rules: Scoring
• Each game is played to 21 points, with players
scoring a point whenever they win a rally regardless of
whether they served.
• If the score reaches 20-all, then the game continues
until one side gains two point lead (such as 24-22).
• When the game reaches to a tie at 29-all, the game
goes into a golden point where whoever scores the first
will win the game.
• At the start of a match, the shuttlecock is cast and
the side towards which the shuttlecock is pointing serves
first.
• Alternatively, a coin may be tossed, with the winners
choosing whether to serve or receive first, or choosing
which end of the court to occupy first, and their
opponents making the leftover remaining choice.
• A match is the best of three games.
• The first player or team to get 2 wins will win the
game.
• The players change ends at the start of the second
round game; If the match reaches a third game, they
change ends both at the start of the game and when the
leading player’s or pair’s score reaches 11 points.
• The server and receiver must remain within their
service courts, without touching the boundary lines, until
the server strikes the shuttlecock.
• The other two players may stand wherever they
wish, so long asthey do not block the vision of the server
or receiver.

Lets in Badminton
• If a let is called, rally is stopped and replayed with
now change to the score.
• Lets may occur because of some unexpected
disturbance such as a shuttlecock landing on court
(having been hit there by players playing in adjacent
court) or in small halls the shuttle may touch an
overhead rail which can be classed as a let.
• If the receiver is not ready when the service is
delivered, a let shall be called; yet, if the receiver
attempts to return the shuttlecock, the receiver shall be
judged to have been ready.

Equipments in Badminton
• Badminton racquets are lightweight, with top quality
racquets weighing between 70 to 95 grams not including
grip or strings.
• Badminton strings are thin, high performing strings
with thicknesses ranging are more durable, but many
players prefer the feel of thinner strings.
• Grip allows a player to increase the thickness of their
racquet handle and choose a comfortable surface to
hold.
• Shuttlecock is a high-drag projectile with an open
conical shape: the cone is formed from sixteen
overlapping feathers embedded into a rounded cork base
• Badminton rules also provide testing a shuttlecock
for the correct speed.
• Badminton shoes are lightweight with soles of
rubber or similar high-grip, non-marking materials.
Compared to running shoes, badminton shoes have little
lateral support.

Officiates in Badminton
• Umpire or the Main Judge for the particular
badminton game. He/She has the power to overrule any
decisions made by the service judge or line judges. The
umpire is the person ensuring that the badminton game
is run smoothly and prevent any players from delaying
the game play. The umpire also looks for the faults
committed around the net area such as whether a player
touched the net when returning the shuttle.
• Service Judges are the responsible in making a
“service fault” call
and to provide shuttles to players.
• Line Judges sits beside the badminton court (right in
front of every in/out lines) to determine whether the
shuttle is inside or outside the boundaries of the court.

SUPPLY CHAIN MANAGEMENT IN HOSPITALITY

MANAGEMENT
INSTRUCTIONAL MATERIALS

LESSON 2: SUPPLY CHAIN MANAGEMENT PROCESS

WEEK 4, 5 and 6
Introduction:

Lambert and Cooper (2000) distinguish three key decisions in SCM, summarized in
Figure 4. The conceptual framework emphasizes the interrelated nature of SCM and the
need to proceed through several steps to design and successfully manage a supply
chain. Each step is directly related to the supply chain objectives, i.e. the degree to
which a supply chain fulfills end-user requirements concerning the key performance
indicators at any point in time, and at what total cost. Key Performance Indicators (KPIs)
refer to a relatively small number of critical dimensions which contribute more than
proportionally to the success or failure in the marketplace (Christopher, 1998).

KPIs compare the efficiency and/or effectiveness of a system with a norm or target
value. A well-defined set of supply chain performance indicators will help establish
benchmarks and assess changes over time. A good example is the Supply Chain
Operations Reference-model (SCOR) developed by the Supply-Chain Council (SCC) as
the cross-industry standard for SCM (see www.supply-chain.org). SCOR provides an
integrated, heuristic approach for supply chain improvement via (i) the modeling of
business processes, (ii) the definition of SCM metrics for evaluating the supply chain
and rapidly identifying high value opportunities and (iii) the identification of best
practices to provide a candidate list of improvement options

Learning Objectives:
After completing this lesson, the student should be able to:
 Understand the 5 Basic Components of Supply Chain Management
 Identify the Different Types of Flow in Supply Chain Management
 Understand the Flow Components in Supply Chain Management
 Identify the Key Supply Chain Members With Whom to Link Processes
 Identify the Processes That Should be Linked With Each Key Member
 Explain the Supply Chain Management Process

Course Material

Components of Supply Chain Management

Supply chain management is a process used by companies to ensure that their supply
chain is efficient and cost-effective. A supply chain is the collection of steps that a
company takes to transform raw materials into a final product. The five basic
components of supply chain management are discussed below −

Plan

The initial stage of the supply chain process is the planning stage. We need to develop
a plan or strategy in order to address how the products and services will satisfy the
demands and necessities of the customers. In this stage, the planning should mainly
focus on designing a strategy that yields maximum profit.

For managing all the resources required for designing products and providing services,
a strategy has to be designed by the companies. Supply chain management mainly
focuses on planning and developing a set of metrics.

Develop (Source)

After planning, the next step involves developing or sourcing. In this stage, we mainly
concentrate on building a strong relationship with suppliers of the raw materials required
for production. This involves not only identifying dependable suppliers but also
determining different planning methods for shipping, delivery, and payment of the
product.

Companies need to select suppliers to deliver the items and services they require to
develop their product. So in this stage, the supply chain managers need to construct a
set of pricing, delivery and payment processes with suppliers and also create the
metrics for controlling and improving the relationships.

Finally, the supply chain managers can combine all these processes for handling their
goods and services inventory. This handling comprises receiving and examining
shipments, transferring them to the manufacturing facilities and authorizing supplier
payments

Make

The third step in the supply chain management process is the manufacturing or making
of products that were demanded by the customer. In this stage, the products are
designed, produced, tested, packaged, and synchronized for delivery.

Here, the task of the supply chain manager is to schedule all the activities required for
manufacturing, testing, packaging and preparation for delivery. This stage is considered
as the most metric-intensive unit of the supply chain, where firms can gauge the quality
levels, production output and worker productivity.

Deliver

The fourth stage is the delivery stage. Here the products are delivered to the customer
at the destined location by the supplier. This stage is basically the logistics phase,
where customer orders are accepted and delivery of the goods is planned. The delivery
stage is often referred as logistics, where firms collaborate for the receipt of orders from
customers, establish a network of warehouses, pick carriers to deliver products to
customers and set up an invoicing system to receive payments.

Return

The last and final stage of supply chain management is referred as the return. In the
stage, defective or damaged goods are returned to the supplier by the customer. Here,
the companies need to deal with customer queries and respond to their complaints etc.
This stage often tends to be a problematic section of the supply chain for many
companies. The planners of supply chain need to discover a responsive and flexible
network for accepting damaged, defective and extra products back from their customers
and facilitating the return process for customers who have issues with delivered
products.

Supply chains can be managed as a single entity through the dominant member or,
alternatively, through a system of partnerships requiring well-developed co-operation
and co-ordination. Formulating supply chain objectives is therefore not an easy task
since all partners have to agree on the selection of indicators, the definition of the
indicators and the target values.

Supply Chain Management – Process Flow

Supply chain management can be defined as a systematic flow of materials, goods, and
related information among suppliers, companies, retailers, and consumers.

Types

There are three different types of flow in supply chain management −

 Material flow
 Information/Data flow
 Money flow

Let us consider each of these flows in detail and also see how effectively they are
applicable to Indian companies.

Material Flow

Material flow includes a smooth flow of an item from the producer to the consumer. This
is possible through various warehouses among distributors, dealers and retailers.

The main challenge we face is in ensuring that the material flows as inventory quickly
without any stoppage through different points in the chain. The quicker it moves, the
better it is for the enterprise, as it minimizes the cash cycle.

The item can also flow from the consumer to the producer for any kind of repairs, or
exchange for an end of life material. Finally, completed goods flow from customers to
their consumers through different agencies. A process known as 3PL is in place in this
scenario. There is also an internal flow within the customer company.

Information Flow
Information/data flow comprises the request for quotation, purchase order, monthly
schedules, engineering change requests, quality complaints and reports on supplier
performance from customer side to the supplier.

From the producer’s side to the consumer’s side, the information flow consists of the
presentation of the company, offer, confirmation of purchase order, reports on action
taken on deviation, dispatch details, report on inventory, invoices, etc.

For a successful supply chain, regular interaction is necessary between the producer
and the consumer. In many instances, we can see that other partners like distributors,
dealers, retailers, logistic service providers participate in the information network.

In addition to this, several departments at the producer and consumer side are also a
part of the information loop. Here we need to note that the internal information flow with
the customer for in-house manufacture is different.

Money Flow

On the basis of the invoice raised by the producer, the clients examine the order for
correctness. If the claims are correct, money flows from the clients to the respective
producer. Flow of money is also observed from the producer side to the clients in the
form of debit notes.

In short, to achieve an efficient and effective supply chain, it is essential to manage all
three flows properly with minimal efforts. It is a difficult task for a supply chain manager
to identify which information is critical for decision-making. Therefore, he or she would
prefer to have the visibility of all flows on the click of a button.

The present performance measures used in most companies have several problems
that prevent them from effectively measuring total supply chain performance. Supply
chain participants should start with jointly identifying order winners and satisfiers for the
supply chain, because these provide the intended direction of control actions to improve
supply chain performance. By analyzing the goals of supply chains can be managed as
a single entity through the dominant member or, alternatively, through a system of
partnerships requiring well-developed co-operation and co-ordination.

Formulating supply chain objectives is therefore not an easy task since all partners have
to agree on the selection of indicators, the definition of the indicators and the target
values. The present performance measures used in most companies have several
problems that prevent them from effectively measuring total supply chain performance.
Supply chain participants should start with jointly identifying order winners and satisfiers
for the supply chain, because these provide the intended direction of control actions to
improve supply chain performance. By analyzing the goals of each individual
organization and by identifying market requirements, integrated KPIs can be defined
and norms established. We will now discuss the three key decisions in more detail.

Supply Chain Management – Flow Components

After understanding the basic flows involved in the supply chain management, we need
to consider the different elements present in this flow. Thus, the different components of
the flow of supply chain are described below.

Transportation

Transportation or shipment is necessary for an uninterrupted and seamless supply. The

factors that have an impact on shipment are economic uncertainty and instability,
varying fuel prices, customers’ expectations, globalization, improvised technologies,
changing transportation industry and labor laws.
The major elements that influence transportation should be considered, as it is
completely dependent on these factors for order completion as well as for ensuring that
all the flows work properly. The major factors are –

Long-term Decisions

Transportation managers should acknowledge the supply freight flow and accordingly
design the network layout. Now, when we say long term decision, we mean that the
transportation manager has to select what should be the primary mode of
transportation.

The manager has to understand the product flows, volume, frequency, seasonality,
physical features of products and special handlings necessities, if any. In addition to
this, the manager has to make decisions as to the extent of outsourcing to be done for
each and every product. While considering all these factors, he should carefully
consider the fact that the networks need not be constant.

For example, in order to transport stock to regional cross dock facilities for sorting,
packaging and brokering small loads to individual customers, stock destinations can be
assembled through contract transportation providers.

Lane Operation Decisions

These functional decisions stress on daily freight operations. Here, the transportation
managers work on real time information on products’ requirements at different system
nodes and must collaborate every move of the product that is both inbound and
outbound shipping lanes so as to satisfy their services demands at the minimal possible
cost.

Managers who make good decisions easily handle information and utilize the
opportunities for their own profit and assure that the product is moved to them
immediately, whenever it is demanded, that too in the right quantity. At the same time,
they are saving cost on transportation also.

For example, a shipment has landed from a supplier who is based in New Jersey and in
the same week, a product needs to be dispatched to New York as it becomes available
for movement. If the manager is aware of this information in advance, he would prepare
everything as per the demand and the products could be shipped out immediately.

Choice and Mode of Carrier

A very important decision to be made is to choose the mode of transportation. With the
improvement in the means of transportation, modes of transport that were not available
in the traditional transportation modes in the past can be now be a preferred choice.

For example, rail container service may offer a package that is cost-efficient and
effective as compared to a motor transport. While making a decision, the manager has
to consider the service criteria that need to be met, like the delivery time, date special
handling requirements, while also taking into consideration the element of cost, which
would be an important factor.

Dock Level Operations

This involves the last level of decision-making. This comprises planning, routing and
scheduling. For example, if a carriage is being loaded with different customers’ orders,
the function of the dock-level managers is to assure that the driver is informed of the
most efficient route and that loads are placed in the order of the planned stops.

Warehousing

Warehousing plays a vital role in the supply chain process. In today’s industry, the
demands and expectations of the customers are undergoing a tremendous change. We
want everything at our door step – that too with efficient price. We can say that the
management of warehousing functions demands a distinct merging of engineering, IT,
human resources and supply chain skills.

To neutralize the efficiency of inbound functions, it is ideal to accept materials in an

immediately storable conveyance, like a pallet, case or box. For labeling the structure,
tool selection and business process demand the types and quantities of orders that are
processed. Further, the number of stock-keeping units (SKU’s) in the distribution
centers is a crucial consideration.

The Warehouse Management Systems (WMS) leads the products to their storage
location where they should be stored. The required functionality for the completion and
optimization of receiving, storing and shipping functions is then supplied.

Sourcing and Procurement

Sourcing and procurement are a vital part of the supply chain management. The
company decides if it wants to perform all the exercises internally or if it desires to get it
done by any other independent firm. This is commonly referred as the make vs buy
decision, which we will be discussing in brief in another chapter.

Returns Management

Returns management can be defined as the management that invites the merger of
challenges and opportunities for inbound logistics. A cost-effective reverse logistics
program links the available supply of returns with the product information and demand
for repairable items or re-captured materials. We have three pillars that support returns
management processes. These are as follows −

 Speed − It is a must to have quick and easy returns management and automate
decisions regarding whether to produce return material authorizations (RMAs)
and if so, how to process them. Basically, the tools of speed return processing
include automated workflows, labels & attachments and user profiles.
 Visibility − For improving the visibility and predictability, information needs to be
captured initially in the process, ideally prior to delivering the return to the
receiving dock. Most effective and easily implementable approaches for obtaining
visibility are web-based portals, carrier integration and bar-coded identifiers.
  Control − In case of returns management, synchronizing material movements is
a common issue that needs to be handled. The producers need to be very
cautious and pay close attention to receipts and reconciliation and update the
stakeholders of impending quality issues. In this case, reconciliation activates
visibility and control all over the enterprise. The key control points in this process
are regulatory compliance, reconciliation and final disposition and quality
assurance.

Software solutions can assist in speeding up the returns management by supporting

user profiles and workflows that state supply chain partners and processes, by labeling
and documentation that tracks the material along with the web-based portals and by
exception-based reporting to deliver information for timely reconciliation. These
characteristics, when executed with the three pillars mentioned above, support a
reliable and predictable returns process to count value across the company.

Post - Sales Service

Now that the ordered shipment is over, what is the next step? The post sales service in
supply chain tends to be an increasingly essential factor as businesses offer solution
instead of products.

The post sales services comprise selling spare parts, installing upgrades, performing
inspection, maintenance and repairs, offering training & education and consulting.

Presently, with the growing demands of the clients, a high volume of after sales service
proves to be a profitable business. Here, the services are basically heterogeneous and
the value-added services are different from those provided prior to sales service.

1. Who are the key supply chain members with whom to link processes?

The first step in analyzing and redesigning a supply chain is to determine the
organisations that are part of the supply chain under investigation. For most
manufacturers, the supply chain looks less like a pipeline or chain than an uprooted
tree, where the branches and roots are the extensive network of customers and
suppliers. The question is how many of and how intensive these branches and roots
need to be managed. Management will need to choose the level of partnership
appropriate for each particular supply chain member knowing that firm capabilities in
time and effort are limited (Lambert & Cooper, 2000). With some suppliers partnerships
are required since the raw materials they deliver are crucial; others are less important
and only have to be monitored. The key is to sort out which members are critical to the
success of the company and the supply chain – in line with the supply chain objectives -
and, thus, should be allocated managerial attention and resources.

2. What processes should be linked with each key member?

Successful SCM requires a change from managing individual business processes within
one organization to integrating activities over organizations into key supply chain
processes. Lambert and Cooper (2000) have identified eight key business processes
that could be integrated with the key members in the supply chain (see table 3). It is
usually not necessary to integrate all processes; e.g. if the order winner is
responsiveness focus should be on order fulfillment, whereas if the order winner is
innovation focus should be on joint product development.

Business processes that could be integrated in the supply chain: Business process,
General description, Customer relationship management, Specifying service level
agreements with key customers, Customer service management, Providing the
customer with real-time information on promised shipping dates, and Product availability
through interfaces with the organizations’ production and distribution operations,
Demand management Balancing the customer’s requirements with the firm’s supply
capabilities, Order fulfillment Delivering products and meeting customer need dates,
Manufacturing flow management Pulling product through the plant based on customer
needs, Procurement Developing strategic plans with suppliers to support the
manufacturing flow management process and development of new products, Product
development and commercialization Customers and suppliers must be integrated into
the product development process in order to reduce time to market Returns process
Aligning processes to realize an efficient return of re-usable items

SCM literature suggests several redesign strategies to improve the effectiveness and
efficiency of these business processes in the supply chain. Van der Vorst and Beulens
(2002) have identified a generic list of SCM redesign strategies to facilitate the redesign
process and accomplish joint supply chain objectives. These are the following:

 Redesign the roles and processes performed in the supply chain (e.g.
change or reduce the number of parties involved, re-allocate roles and eliminate
non-value-adding activities);
 Reduce customer order lead times (e.g. change the position of the decoupling
point (see the next section), implement ICT systems for information exchange
and decision support, reduce waiting times, increase manufacturing flexibility);
 Create information transparency (e.g. establish an information exchange
infrastructure in the supply chain and exchange demand/supply/inventory or WIP
information, standardize product coding);
 Synchronize logistical processes to consumer demand (e.g. increase
execution frequencies of production and delivery processes, decrease the lot
sizes); and ?? Co-ordinate and simplify logistical decisions in the supply chain
(e.g. co-ordinate lot sizes, eliminate human interventions, differentiate and
simplify products, systems and processes). Van der Vorst and Beulens (2002)
propose that in order to identify the most effective strategies in a specific supply
chain one should focus on the identification and management of the sources of
uncertainties in the supply chain’s decision-making processes. We refer to their
article for an elaborated discussion.

3. What level of integration and management should be applied to each process

linkage?
The literature on business process reengineering and SCM suggests numerous
possible components that must receive managerial attention when managing supply
relationships. Lambert and Cooper (2000) distinguish two groups of management
components; see table 4. The first is the physical and technical group, which includes
the most visible, tangible, measurable and easy-to-change components. The second
group, the managerial and behavioral components, defines the organizational behavior
and influences how the physical and technical management components can be
implemented. If the managerial and behavioral components are not aligned to drive and
reinforce an organizational behavior supportive to the supply chain objectives and
operations, then the supply chain will likely be less competitive and profitable. If one or
more components in the physical and technical group are changed, then management
components in the managerial and behavioral group likewise may have to be re-
adjusted. Especially the managerial and behavioral components are well-known
obstacles to SCM as they might hinder the development of trust, commitment and
openness between supply chain members (as we will discuss in section 4)

Two groups of management components that have to be aligned in the supply chain.
Physical and technical components Managerial and behavioral components

 planning and control methods (e.g. push or pull control);

 work flow/activity structure (indicates how the firm performs its tasks and
activities);
 organization structure (indicates who performs the tasks and activities, e.g.
cross-functional teams);
 communication and information flow facility structure (e.g. information
transparency);
 product flow facility structure (e.g. location of inventories, decoupling points).
 management methods (i.e. the corporate philosophy and management
techniques);
 corporate culture and attitude;
 risk and reward structure;
 power and leadership structure.

The groundwork for successful SCM is established by an explicit definition of the supply
chain objectives and related key performance indicators and, successively, by taking
the three key SCM decisions. The optimal supply chain design will differ for each supply
chain depending on the competitive strategy and the market, product and production
characteristics. To illustrate this, the next section will discuss in more detail one of the
main trade-offs to be made in SCM, that is, the trade-off between efficient and
responsive supply chains.

The trade-off between efficiency and responsiveness

Marshall Fisher (1997) suggests that the nature of the demand for a product should be
carefully considered before a supply chain strategy is (re)devised. Fisher divides
products into two categories:

 primarily functional products satisfying basic needs which have stable,

predictable demand and long life cycles typically with high levels of competition
resulting in low profit margins;
 primarily innovative products with higher profit margins, have unpredictable
demand and short life cycles and, usually higher levels of product variety.

Fisher states that the root cause of the product availability problem in present-day
supply chains is a mismatch between the type of product and the type of supply chain.
Supply chains that deal with functional products should focus on efficiency / leanness to
minimize the physical costs related to production, transportation and inventory storage.
On the other hand, supply chains that deal with innovative products should be designed
focusing on responsiveness / agility to minimize market mediation costs (i.e. the cost
that arise when the variety of products reaching the marketplace does not match what
consumers want to buy resulting in lost sales opportunities and dissatisfied customers).
Table 5 compares both types of supply chains.

What we have seen in the last 15 years is that consumers and retailers have become
much more demanding and product-life cycles have shortened significantly in all kind of
sectors (e.g. computers, food, automotive). In today’s marketplace the keys to long-term
competitive advantage are flexibility and customer response. This has resulted in
functional products becoming innovative products. The problem is that the supply
chains that produce those innovative products are still efficient.

THE SUPPLY CHAIN MANAGEMENT PROCESS

INSTRUCTIONAL MATERIALS

LESSON 3: SIGNIFICANCE OF SUPPLY CHAIN MANAGEMENT IN THE

HOSPITALITY INDUSTRY

WEEK 7 and 8

Introduction
Logistics and Supply chain management in the hotel industry is of great
significance. Supply chain management or SCM as it is popularly known as is an
integral and indispensable part of the hotel industry.

Why is SCM in the hotel industry a key to success?

The role of supply chain management in the hotel industry is crucial towards sustained
competitive advantages.

A well-managed supply chain can be the key difference between a successful and
unsuccessful hotel operation.

This is due to the following key reasons:

 The hotel industry has an extremely complex supply chain

 There are multiple stakeholders involved in the supply chain of the hotel industry
 Usually, a large inventory is required which increases inventory holding cost
 A huge number of perishable goods can account for wastage and increased cost
 External factors and seasonality of the hotel industry make it difficult to forecast
requirements accurately

Learning Objectives:

1. Understand the Factors Affecting Supply Chain Management in the Hospitality

Industry

2. Identify the Problems of the Hotel Industry Related to Supply Chain

3. Identify Efficient Hotel Industry Supply Chain Management Practices

4. Identify the Supply Chain Management Challenges in the Hotel Industry

Course Materials:

Background for Supply Chain Management in Hospitality Industry

Joseph Acura, president of consulting firm Supply Chain Management in Ridgewood,

N.J., says the hospitality industry as a whole is starting to awaken to the value of supply
chain. “Currently, we are about two to three years behind the manufacturing industry,”
reports Acura, whose company was spun off from Atlanta-based Intercontinental Hotels
Group, where Acura had been the chief procurement officer, and who now provides
third party procurement services for the hotel group. “The hospitality industry is
beginning to catch up quickly, though,” he adds.

When Acura arrived as CPO for Intercontinental four years ago, the company’s focus
was on cost management and a third party firm was conducting a major spend-analysis
project. Acura took over that project, implemented a supplier consolidation effort and
created some performance metrics for existing suppliers.

Factors Affecting Supply Chain Management in the Hotel industry

Before discussing the utility of Supply chain management in the hospitality industry, one
needs to understand that the premise under which the hospitality industry operates is
much different from other industries.

The industries capital costs are high, operating costs being comparatively lower. The
hotel industry has its unique characteristics, like customer centricity, different types of
management etc. Firstly, for the hotel industry the guest or customer is “GOD”. Many a
time it becomes difficult for extreme standardization. Customer satisfaction is of
paramount importance to the hotel industry. This affects the supply chain management
negatively.

In the hospitality industry the customer related activities such as food and beverage
production and service, housekeeping, Front office management are given utmost
importance. The back office operations such as the accounts, purchases, supplies chain
management, revenue recording etc take a back seat.

The purchase manager is always under constant pressure to meet the user
departments’ unplanned needs. The majority of the internal customers of the purchase
manager, be it the food and beverage production manager, the front office manager or

etc operate at a higher level in the hierarchy. They have more importance in the
organization because of their direct contact with the customers. As a result the
purchase manager always tries to have huge buffer stocks, lest he should fall short of
satisfying the hotel operating/user departments. But this does not mean that quality
management processes should be totally ignored. Secondly, different types of
management systems, such as the ownership hotels, franchisees, hotels which are run
on operating contracts by chains etc. The different management systems have different
implications on the supply chain management. This leads to unique set of problems for
differently managed properties which are broadly discussed as under. Thirdly, the
current trends in the industry show that computerized property management systems
are used but mainly for front office management and reservation systems. The
interlinking of office processes be it hotel front office back office and purchase process
is not found in most properties. In other words all the efforts are customer oriented, a
result as lot of cost reduction which can be attained through improved upstream
functions of supply chain management is lost. Proceeding from the above it follows that
there are certain problems which can be identified which are exclusive to the hotel
industry.

Problems of the Hotel industry Related to Supply Chain

Material costs: The cost of raw materials purchase is quite huge in the hotel scenario.
Majority of the consumables of the hotel are of perishable nature. A hotel store deals
with huge quantities of the items with very less price. Bulk of the direct material cost is
invested in such items. Because of the perishable nature, one cannot make use of the
economies of bulk purchase. This increases the number of transactions and thereby the
transaction costs. The logic of mechanization or automation cannot be truly applied
because of the innumerable different Items bought for many departments from a large
numbers of suppliers. Standardization is not possible in such situations. This results in
increased transaction costs.

Material ordering costs: The individual departments normally use manual indents and
purchase requisitions independently. In many properties the hotels do not have
computerized indenting and purchase requisitions. The consolidation of such indents
and requisitions becomes quite time consuming. The purchase department is found to
place individual orders for same products, due to difficulty in consolidation Even for
chain properties where different units are located in the same city, the hotels do not take
advantage of bulk purchasing due to reasons stated above. It may be found that hotels
purchase too many units of different brands and pack

sizes. This has a negative impact on consolidation, increased supplier base, and
increase in cost. At times hotels belonging to the same group may be buying same
products from same suppliers at different prices. This also greatly increases the cost of
transportation and other direct costs Through supply chain management there could be
considerable cost reduction. Inventory holding costs: Forecasting of material required is
quite unheard of. Even if done, the activity becomes a mere paper tiger, the purchase
department, in the fear of not being able to give the right items to the user departments
on time, stock large quantities of materials. This occupies a large space and there by
leads to increase in costs.

Emergency purchases: Due to lack of planning, emergency purchases are a matter of

routine and not due to exception. The purchases are made on the request to the user
departments on the spur of the moment, and are regularized later by making the
required paper work. Where does the Supply chain process start? There are two
possibilities for implementing the supply chain systems: strengthening the systems
internally or through outsourcing. The outsourcing of Supply chain management has
come of age and there are umpteen service providers, which an organization can make
use of. In this paper an attempt is made to discuss the strengthening of the systems
internally. The purchasing process in any industry involves setting up of the purchasing
objectives which could be to support operating requirements

• Buy from right place, right source, right specification, right quality and quantity
and time • Manage efficiently and effectively
• Select develop and maintain sources of supply
• Constantly endeavor to improve relationship with suppliers
• Support organizational goals
• Develop supply strategies

Best Practice: Efficient Hotel Industry Supply Chain Management

The hotel industry is a huge industry which has a global footprint. Thus the SCM in the
hotel industry can be extremely complicated especially for the large hotel chains.

Have a look at some of the best practices of procurement below. Procurement is one
of the keys and one of the most important tenets of overall supply chain management.

Automation holds the key

Think IT as it holds the maximum importance in cost strategy in the current knowledge
economy. Automation of a lot of SCM processes in the hotel industry is possible now
and a lot of hotel industry information systems have tailor-made solutions to streamline
supply chain processes.

Have an established strategy

 Do you know the requirements of your hotel for the next year?
 How many blankets would be required to be replaced?
 What about the cutleries?
 How many perishable goods would be required based on occupancy forecast?
 What is inflation like and will the prices change in the future for the products?
 Who are the suppliers and are they reliable?
There are numerous questions like this which must be a part of your supply chain
strategy. These need to be answered within the team.

Streamlined processes help in minimizing wastage and risk.

So, it is crucial to come with a detailed and clear supply chain strategy for your hotel.

Inventory velocity is crucial

To save costs it is important to improve inventory turns. Higher inventory velocity

improves inventory turns. Inventory turns equals ‘Cost of Goods sold’ / ‘Average
Inventory on hand’. Inventory velocity is the speed of products within the supply chain.

Simply said, it’s the time period from purchase order of a retrial to the sale of the
finished good. But, that’s a bit complicated in the hotel industry due to various suppliers.

Lean Logistics

Lean logistics is all about reducing waste.

A lot of techniques like First in first out, automated ordering, proper forecasting, quicker
deliveries etc. need to be employed in the hotel industry to minimize wastage.

Due to uncertain bookings and demand, this is crucial for the hotel industry.

 Here are some of the useful tips to move towards lean logistics.
 Booking data should be integrated into an effective way of ordering.
 Historical data are useful for eliminating waste.
 Pooling resources (even with hotel competitors) to minimize waste can be
effective.
 Suppliers with lesser turnaround time should be sourced.
 Greater Usage of Automation
 Using First in First out during storage for perishables and other food-related
products.
 Real-time inventory monitoring is crucial.

There are numerous other measures popular in various industries to ensure that
measures for lean logistics are incorporated in an effective manner

Bring customers into your supply chain

Automation can make hoteliers a big winner. Using hospitality innovation, it is possible
to bring your customers into your supply chain.

Real-time inventory monitoring and order based on customer’s requests will ensure
minimum wastage.
According to a blog post by Oracle, today’s supply chain is all about the customer and
their experiences. The supply chain of the hotel industry should have its customer at its
core just as the below image suggests.

Customer experience and expectation just be integrated into the hotel industry supply
chain.

Speed, quality and precision are important to customer satisfaction. Using artificial
intelligence and machine learning in hotel industry, a lot can be automated in its supply
chain.

Challenges in Supply Chain Management in the Hotel Industry

The hotel industry is an extremely diverse industry due to which the suppliers range
from local to international and are in big numbers.

Here are the key challenges in supply chain management within the hotel industry:

 Variable demand of the hotel industry is a key challenge as it makes it difficult to

have uniformity in the SCM processes. Cancellations and external factors add to
the trouble.
 Product lifecycle traceability is a key challenge leading to additional wastage.
 New competition and emerging markets can disrupt existing supply chain leading
to new players.
 Automation is a boon and a challenge as well as it is adding new players in the
supply chain while dislodging a lot of others leading to a continuously evolving
ecosystem of logistics and supply chain.
 Due to a lot of products leading to numerous suppliers, supplier performance can
be a key challenge leading to unnecessary disruptions in supply chain
management.
 Transportation and other logistics constraints can always pose a challenge to the
hotel industry.
 Creation of new demands from customers due to innovation and changing
service patterns.
 Lack of training regarding logistics and supply chain within the hotel industry.

There are multiple other challenges in the hotel industry but most of these can be
negotiated through a proper supply chain strategy and through utilizing best practices of
supply chain management for the hotel industry.

INSTRUCTIONAL MATERIALS

LESSON 4: STRATEGIC SOURCING

WEEK 10, 11 and 12

Introduction:

Having a current, flexible sourcing strategy can not only reduce costs and increase
efficiency, but also serve as a competitive advantage to help organizations increase the
top line.
Supply chain costs, primarily procurement and transportation, can range from 50 to 70
percent of sales, depending on industry. So it is critical to spend considerable time on
developing your organization's strategy. Periodically reviewing your sourcing strategy
ensures you will achieve desired results and continue to align with business objectives.

Successful sourcing requires a thorough understanding of a company's business

strategy, the resources required to deliver that strategy, and the market forces and
unique risks within the company associated with implementing specific approaches.

Learning Objectives:

 After completing this lesson, the student should be able to:

 Identify Sourcing Strategies
 Understand the Steps of the Procurement Process
 Differentiate Centralized and Decentralized Purchased Management
 Identify the Common Problems in Hospitality Procurement
 Understand How to Assess Existing and New Hotel Supply
 Understand the Selection Process

Course Materials:

Some sourcing strategies to consider:

 Outsourcing. Having suppliers provide goods and services that were previously
provided internally.
 Insourcing. Delegating a job to someone within the company.
 Nearsourcing. A business places some operations close to where its end
products are sold to save time and money.
 Vertical integration. Merging companies at different stages of production and/or
distribution in the same industry. When a company acquires its input supplier it is
called backward integration; when it acquires companies in its distribution chain it
is called forward integration.
 Few or many suppliers. A many-supplier strategy is commonly used for
commodity products and purchasing is typically based on price. Single-source
purchasing refers to purchases from one selected supplier, even though other
suppliers provide similar products. Sole-source procurement refers to purchases
with only one supplier. Single- or sole-supplier relationships can be high risk, but
reap big rewards.
 Joint ventures. A business entity created by two or more parties, generally
characterized by shared ownership, shared returns and risks, and shared
governance.
 Virtual enterprise. A network of independent companies (i.e., suppliers,
customers, competitors) linked by information technology to share skills, costs,
and access to one another's markets. In many organizations, procurement
focuses primarily on cost reduction, which perhaps should be one focus if the
company has a cost reduction strategy. In today's competitive world, however,
where most companies don't focus only on cost as a strategy, there tends to be
more emphasis on creating value, while not ignoring cost and waste reduction.

FINDING VALUE AREAS

In general, moving toward lean procurement will help you increase total value. While
concepts such as just-in-time are lean tools that focus on inventory waste, many other
areas in procurement can benefit by:
  Improving the procurement process itself as well as workflows; thereby
reducing time and eliminating waste.
 Reducing or lowering costs while improving both product and service quality.
 Improving supplier performance and responsiveness.
 Increasing focus on activities that add value to the firm.  Enhancing
procurement's strategic rather than transactional focus. Implementing an agile
sourcing strategy provides a competitive advantage to help companies lower
costs and improve efficiency.

Procurement Management

Procurement management is responsible for overseeing all the processes involved in

acquiring the products, materials, goods and services needed for efficient business
operations. Depending on the business and industry, the terms “sourcing,” “purchasing”
and “procurement” may be used interchangeably to describe the function of procuring
supplies and managing the process, with sourcing considered more strategic, and
purchasing and procurement used to refer to the actual operational function.

Organizations across all industries depend on the expertise of procurement

management in seeking out and managing external supplier relationships to ensure
these needed items are acquired at the best possible cost. For these reasons,
procurement management has a direct impact on an organization’s bottom line and
strategic business operations.

What is the Importance of Procurement?

Without procurement, it would be impossible for most business operations to function.

Procurement management ensures that all items and services are properly acquired so
that projects and processes can proceed efficiently and successfully.

More than a business necessity, procurement can be leveraged as a competitive

advantage when optimized to save money, time and resources. But driving down costs
by avoiding delays and errors and maximizing resources is just part of the reason
procurement management plays an important role in a company’s bottom line.

Procurement management can be responsible for negotiating lucrative production and

supplier contracts, spearheading innovative new processes and play an important part
in taking a domestic business operation global. Procurement management can also play
an important role in spearheading corporate social responsibility in diversity and
inclusion by proactively seeking diverse suppliers.

“Only focusing on cost is definitely not sufficient,” says Alex Zhong, supply chain lead at
IBM Sterling on Supply Chain Dive. Procurement management holds “a strategic
position to really support the business growth from a revenue perspective.”

“When you take a look over the last five to 10 years, supply chain has taken on a much
bigger role and encompassed procurement as a key function within the organization, as
opposed to residing outside of the supply chain functions,” says Zhong.

What are the Steps of the Procurement Process?

Managing the procurement of products, materials, goods and services effectively

consists of establishing and following process steps through the entirety of the
procurement lifecycle. These process steps can differ by organization, based on
company needs and business goals.

As detailed by Dr. Tobias Schoenherr, Hoagland-Metzler Endowed Professor in

Purchasing and SCM at Michigan State University’s Eli Broad College of Business
in his Strategic Sourcing course, the core “procure-to-pay” process (the general buying
process that a company goes through when making a purchase) typically includes these
key steps:

Step 1: Specifying and Planning

Establish the product or service need, set the specifications for the product itself and
conduct planning, or forecasting, based on existing data and projections, for when and
how the product is ordered or reordered.

Step 2: Identifying and Selecting Suppliers

Identify and select a supplier to meet product needs, either from established
relationships with approved vendors or preferred suppliers or by researching new
suppliers and sending out an RFx: a request for information/proposal/quotation.

Step 3: Negotiating and Contracting

Negotiate the best price and terms for the product through competitive bidding from
suppliers with their quotes and then direct negotiations to clearly communicate
requirements and set expectations. With all terms agreed upon, finalize and sign the
supplier contract.

Step 4: Placing the Purchase

Order The purchase order (PO) specifically defines the price, product specifications,
and all terms and conditions of the product and/or service being supplied. It also serves
as the “source of truth” of the product being procured for various impacted business
units.

Step 5: Expediting

Expediting the product order is sometimes necessary (i.e. earlier than expected product
obsolescence, a schedule change, etc.). Examining the timeliness of deliveries during
this step can reveal underlying issues to address, such as lack of clarity on payment
dates, delivery times and completion of work.

Step 6: Receipt and Inspection of Purchase

Review all orders against the established specifications and quality standards and
conduct “a three-way match” of the PO with the invoice and the packing slip/receiving
document. If what was delivered does not meet the standards specified, completing a
receiving discrepancy report may be part of this step.

Step 7: Invoice Clearing and Payment

Align purchasing and accounts payable to complete the process of buying the product
after inspection and confirmed document alignment (PO, invoice, packing slip/receiving
document).

Step 8: Maintaining Records and Relationships

Retain all proper records in the case of an audit, for tax information, to confirm product
warranty and for ease of product re-ordering. Provide data and feedback to the supplier
based on key performance indicators to identify areas for improvement and/or needed
changes in the product or the supplier contract.

CENTRALIZED VS. DECENTRALIZED PURCHASE MANAGEMENT

What is Centralized Purchase Management?

Centralized procurement means that a single department controls and manages the
purchasing for the whole organization. Ideally a manager oversees the purchasing
department regarding what materials need to be purchased and in what quantity. The
single purchasing department is generally located in the headquarters.

What is Decentralized Purchase Management?

With this method, rather than leaving the purchasing control with a single department, it
is granted to local branches or departments. They have the authority to purchase items
necessary as per their requirements.

Centralized Purchasing – Pros

1. Purchasing in bulk quantities reduces cost to the organization.

2. Good relations developed with the supplier can lead to better discounts and
bargain in the future.
3. Since shipments are consolidated, the transport cost is also reduced.
4. Inventory investment can be minimized through centralization of purchase.
5. Inventory management gets drastically reduced.
6. Duplication of work can be avoided through centralized purchasing.
7. Policies formulated for purchasing can be maintained uniformly through
centralized purchasing.
8. Centralized records can be maintained.
9. Since a single department is involved, the quality of the materials can also be
maintained.
10. A centralized store can be maintained under centralized purchasing.

Centralized Purchasing – Cons

1. High initial cost can be a deterrent.

2. People in charge of purchasing may not be efficient and this can lead to poor
quality of materials purchased and even incorrect quantity being purchased.
3. If branches are spread out geographically, then centralized purchasing may not
be suitable.
4. In case of an emergency, work can be delayed drastically since materials cannot
be purchased locally.
5. Delay in replacement of defective materials.
6. If the wrong amount of material is purchased, it will be a loss to the organization.

In the end, it depends completely on the company to decide which approach is better for
them. While a centralized purchasing will save money for the company, decentralized
purchasing will give authority to individual departments to purchase what they require.
The way the business is run will decide which method of purchasing will benefit them
the most.

Common Problems in Hospitality Procurement

The role of procurement within a given organization can vary widely, from purchasing
and supply chain management to strategic acquisitions, customer service, and
relationship building.

But for some markets, like the hospitality industry, procurement and purchasing
managers are connected to the success of the business at nearly every level.

In the field of hospitality, procurement occupies a place of singular importance. It serves

not only to supply the organization efficiently, but to produce value through optimal
quality of goods and services as a function of customer service. And in the digital age,
traditional hotels find themselves caught in aggressive competition with new, boutique-
style accommodations provided by AirBnB and similar services, fighting to cut costs
without sacrificing quality or user experience.

Movie theatre, resort, cruise lines, entertainment and hotel procurement professionals
face several challenges that are daunting, but not insurmountable. By familiarizing
yourself with these problems and their solutions, you can streamline your procurement
processes, maximize cost savings, and build lasting value while staying competitive.

Four Challenges Hospitality Procurement Organizations Regularly Face

Like all entities who buy goods and services in the modern marketplace, the hospitality
industry faces, and needs reliable cost-effective solutions to, common procurement
problems.

Inadequate (or No) eProcurement Software Integration

Procure-to-pay process management for hospitality supplies, furniture, fixtures, and

equipment (FF&E) and hotel operations. Supply chain management and vendor
relationship development, reducing operating costs in support of hotel management.

Without a centralized eProcurement system to help support these procurement

functions, even the most seasoned purchasing managers may find themselves fighting
not just the tide, but a tidal wave of trouble. Failing to find and integrate an e-purchasing
software package that suits the particular needs of your organization can spell disaster
in the form of lost or duplicated purchase orders, maverick spending on everything from
office supplies to critical services, and missed opportunities to form strategic
partnerships with vendors for greater cost savings.

Conversely, those in the hospitality business who integrate a real-time, centralized,

eProcurement system will quickly discover they have:

 Total transparency for all transactions, reducing or eliminating maverick spend

 Access to analytics that inform planning and supply chain management in
support of:

1. Evaluating and strengthening vendor relationships

2. Obtaining better delivery times, the highest quality products, and the
best prices.

3. Efficient forecasting and planning

 More control over internal and externally sourced support for essential services,
including Business Process Outsourcing (BPO)
 User-friendly self-service for common purchasing activity
 Greatly increased efficiency of document and order processing

Better still, they’ve created an environment that minimizes many of the other common
problems, whether they’re supplying a single hotel or hundreds.

Poor Demand Planning

In a seasonal business like hospitality, the challenges of balancing how much of a good
or service to buy—and when to buy it—are greatly increased. With customers
demanding best quality goods and services, you don’t want to risk running out, so you
might end up spending more than you should to make sure customer service doesn’t
take a hit. On the other hand, if you stock up on goods when they’re more affordable but
they aren’t used, you’ve effectively wasted your money completely (if they’re perishable
or fall out of fashion) or wasted time and labor dealing with storage you didn’t plan to
use.

To plan for demand while obtaining the best prices, you need to be able to identify how
and when your company uses goods and services, and create an intelligent and
adjustable strategy for real-time restocking and renewals.

A software solution supports better spend management by providing key insights into
quarterly and annual trends for customer demand, availability of products, and cash
flow. You can make relevant and cost-effective decisions that satisfy your business
needs (and add maximum savings to your bottom line) in a timely fashion, without losing
value.

Ineffective Relationship Management

Are your vendors familiar colleagues who know and understand your business needs?
Or are they mere ciphers—simply a voice on the phone or a screen on the Internet?
Building strong relationships with your suppliers is critical to building a successful
hospitality business, and without them, you might be missing out on special deals,
volume pricing, or even exclusive contracts that can create not just savings, but
powerful value in support of your company’s short and long-term goals.

In an industry defined by healthy, productive relationships, an eProcurement system

makes it easier to collect and leverage data for mutually beneficial relationships across
your entire supply chain. Strategic partnerships make it easy to keep customers happy
while generating value through excellent goods, services, and customer support.

Focusing on Savings Instead of Value

In a perfect world, the best products and services would be plentiful, cheap, and
delivered for free. But here in the real world, high costs and tight budgets can make it
tempting to focus on rock-bottom prices rather than providing the goods and services
your customers expect and need. But the key to long-term success lies in procurement
services designed to track and exploit opportunities to generate true and lasting value,
rather than short-term savings.

From FF&E to BPO, so-called “bargains” are rarely bargains, since they may prove to
be of sub-par quality, fail (and require replacement) more often, and generate
dissatisfaction that translates to lost customers, costly PR problems, and rock-bottom
profits. With e-purchasing software at the core of your procurement process, it’s easy to
track and fulfill customer needs and expectations while still getting the best possible
price on the highest quality goods available—especially if you’ve also focused on
building vendor relationships that can generate new opportunities for savings and long-
term value.

How to Assess Existing and New Hotel Supply

Hotel markets are dynamic because guest expectations are always evolving. The
inventory of existing hotels is an artifact of historical guest preferences, while the new
hotel supply pipeline indicates current and future desires. A market reaches equilibrium
when supply meets demand, but this can be elusive, especially during and economic
expansion. Therefore, it is important to start with a firm understanding of hotel supply
before committing to an investment.

Market Survey

The first step in analyzing a market is to understand what exists. At its most basic level,
a market survey should consider all hotels along the chain scale. Depending on your
investment strategy, you may be able to limit the survey to properties with more than 50
rooms and less than 500 rooms. This is where most brands play. However, you should
include smaller or bigger hotels if they are competitive within your strategy.

Your survey should include the finer details of each hotel, including:

 Number of Rooms
 Function Space Sq. Ft.
 Year Built
 Year Last Renovated
 Asset Quality
 Brand
 Management Company
 Owner / Major Partners
 Last Sale Date and Price
 Financing Information – Lender, Loan Amount, and Maturity Date

A comprehensive survey allows you to apply some analytical techniques that define the
market. For example, you could categorize many of these factors into three or more
broad buckets. Count the number of rooms or properties that fit into each category to
draw conclusions about over or underrepresented product.

An analytical approach allows you to quickly filter hotels in a market by investment or

operating characteristics that will fall within your investment criteria. When you pair this
data with what you know about demand coming to the market, you’ll be able to assess
where there are glaring holes.

Consider Local Retail

Restaurants and retail are other dimensions of the market are to consider. Expect these
to be competitive if you’re interested in full service hotels or select service with F&B
options, like Courtyard or Hilton Garden Inn. Anything that takes the guest out of your
hotel will be a major influence in their perception of your hotel.

National retailers spend tremendous resources to analyze a market. While their

research targets the demand side of the equation, your market survey will point to
additional opportunities that may exist for new hotel supply.

Quality and Brands

Get on the ground and walk the major competitive hotels. TripAdvisor can give you a
sense of asset quality, but those reviews are subjective. They only represent a fraction
of guests. The 95% of guests that don’t use TripAdvisor or leave reviews on OTAs may
have a completely different opinion. You can only get that from visiting the hotels
yourself.

Construction and renovation years have a big impact on competitive positioning. Guest
preferences change, and older properties struggle to maintain modern standards. This
can be as simple as a different lobby or room layout. A hotel built in 1995 provides a
very different experience than one build in 2015 even though it may have similar
finishes.

Remember, quality of the structure and interiors is important, but property culture can
overwhelm much of this. A beautiful, new hotel with a bad culture will underperform a
shabby hotel that puts its guests on a pedestal every day of the week.

Guest profiles are the primary influence in designing a hotel brand. Therefore, a brand
of a different concept within the same brand family will appeal to a different guest.
However, competing brands, like Hampton Inn and Fairfield Inn, appeal to almost the
exact same guest demographic and psychographic profile. A guest’s decision comes
down to loyalty and quality in this case.

Get to know the offerings of each brand in your investment strategy. This knowledge
comes from experience and exposure. The more hotels you see the better.

Hotel brands are in the franchising business. Their primary concern is consistently
accumulating a larger share of the total revenue in a market. Therefore, they do better
with the more brands they can fit into an area. Guest experience and increasing
revenue are important complementary objectives, but brand presence is a real

Development Stages

New hotel supply can be difficult to gauge. The announcement of a new development
does not ensure delivery. There are many steps between buying the land and opening
the door. Further, the abilities and track record of the developer behind the project have
a huge impact on the likelihood of completion.

A variety of factors influence the success of a new development, including sponsor,

government, and market timing. Other factors, beyond these three, combine to make it
a challenging undertaking. Each of these factors are at play in progressing through the
following development stages:

 Early Plan – feasibility and announcement

 Planning – preparation of materials for government approval submission
 Final Planning – government approvals received and preparing construction
documents
 Construction – active building and pre-opening activities
 Opening – product launch and ramping up operations

Your market survey should uncover where each proposed new hotel is in this process
and how long they’ve been sitting at that stage. A new hotel development takes 2-3
years to open from the initial announcement. Government approvals can hold up a
process, but once the developer breaks ground, you can expect to have a competitor
open its doors within 16-22 months.

New hotels are not directly competitive from day one, but they quickly become a threat
after working out the operational kinks. Existing hotels must examine how their property
quality and operations hold up against the new entrant. For example, an existing
property may require some renovations just to maintain a defensive position.

Investment Trends

Investment trends ebb and flow along two major currents – cyclical and secular.

All investors are very aware of the business cycle. Business and consumer sentiment,
money supply, and other factors influence business and consumer spending. Favorable
macroeconomic conditions usually result in good times, while low sentiment and tight
monetary supply end up in slower growth.

Most investors and commentators try to prognosticate about the status of “the cycle” to
time a good entry and exit point. However, nobody has ever been 100% correct on this,
and they miss great opportunities by getting out too early.

Secular trends are based on social, technological, governmental, and other factors that
influence how businesses and consumers behave. This is the undercurrent that dictates
the popularity of a location or product type.
Think of a secular trend as the line between two points on a map – as the crow flies. If
you could go from point A to B without taking surface roads, the journey would be a
breeze. Gravity and the natural and built environment limit our ability to do that.
Therefore, we must contend with the inefficient surface streets – market cycles – to get
from here to there.

All the greatest investors are more focused on the secular trends than business cycles.

Market Example – Miami

New hotel supply enters and existing supply upgrades in markets where demand is
growing. There are very few reasons to spend money in a place with no clear path to
economic growth.

Miami emerged from the 2008 financial crisis as a dominant, international gateway
market. The business cycle created voracious global demand for high-quality properties
located in the United States. That foreign capital found its way into the existing majors,
like New York, San Francisco, and Washington, DC. Still, Miami offered something that
the other high secondary markets couldn’t – a cultural connection to Latin America.

The growth of the Latino population in the United States will handily exceed that of any
other demographic in the coming decades. Miami positioned itself to take advantage of
that growth as the financial and cultural capital of Latin America in the United States. It
courted major corporations to establish their LATAM divisions in the city and worked
with the state to keep a favorable business climate.

There’s no question that Miami and its neighboring cities have tremendous challenges
ahead, but the secular trend is positive.

Development Examples

Extended stay brands are experiencing tremendous growth in new construction. The
contract economy continues to displace a traditional, full-time, location-based workforce.
Further, leisure guests appreciate the additional amenities these properties offer.
Finally, this offering is relatively new to the scene with very few offerings in many
markets. These aspects, among others, make extended stay one of the most attractive
hotel investments for the foreseeable future.

Full service hotels, on the other hand, are losing popularity among developers. They are
expensive to build, operate, and maintain. Aside from dramatically underserved
markets, full service hotel development is next to non-existent. The properties that exist
are enough to meet the needs of most demand, and beyond that, it’s more efficient to
develop a select service or extended stay property.

Demand drives most investment trends. However, supply is the direct reflection of this
demand. Seek to understand what segment of demand each property is serving. This
will help you find demand holes or offerings that are overrepresented in the market.

Supplier Selection Process

Choosing the right supplier involves much more than scanning a series of price lists.
Your choice will depend on a wide range of factors such as value for money, quality,
reliability and service. How you weigh up the importance of these different factors will be
based on your business' priorities and strategy.

A strategic approach to choosing suppliers can also help you to understand how your
own potential customers weigh up their purchasing decisions.
This guide illustrates a step-by-step approach you can follow that should help
you make the right choices. It will help you decide what you need in a supplier,
identify potential suppliers and choose your supplier.

 Thinking strategically when selecting suppliers

 What you should look for in a supplier
 Identifying potential suppliers
 Drawing up a shortlist of suppliers
 Choosing a supplier
 Getting the right supplier for your business

Thinking strategically when selecting suppliers

The most effective suppliers are those who offer products or services that match - or
exceed - the needs of your business. So when you are looking for suppliers, it's best to
be sure of your business needs and what you want to achieve by buying, rather than
simply paying for what suppliers want to sell you.

For example, if you want to cut down the time it takes you to serve your customers,
suppliers that offer you faster delivery will rate higher than those that compete on price
alone.

For some pointers to help you identify what you want from suppliers, see the page in
this guide on what you should look for in a supplier.

The numbers game

It's well worth examining how many suppliers you really need. Buying from a carefully
targeted group could have a number of benefits:

 it will be easier to control your suppliers

 your business will become more important to them
 you may be able to make deals that give you an extra competitive advantage

For example, if you've got a rush job for an important customer, your suppliers will be
more likely to go the extra mile if you spend $1,000 a month than if you spend $250.

However, it's important to have a choice of sources. Buying from only one supplier can
be dangerous -where do you go if they let you down, or even go out of business?

Equally, while exclusivity may spur some suppliers to offer you a better service, others
may simply become complacent and drop their standards.

What you should look for in a supplier

Reliability

Remember - if they let you down, you may let your customer down.

Quality

The quality of your supplies needs to be consistent - your customers associate poor
quality with you, not your suppliers.

Value for money

The lowest price is not always the best value for money. If you want reliability and
quality from your suppliers, you'll have to decide how much you're willing to pay for your
supplies and the balance you want to strike between cost, reliability, quality and service.

Strong service and clear communication

You need your suppliers to deliver on time, or to be honest and give you plenty of
warning if they can't. The best suppliers will want to talk with you regularly to find out
what needs you have and how they can serve you better.

Financial security

It's always worth making sure your supplier has sufficiently strong cash flow to deliver
what you want, when you need it. A credit check will help reassure you that they won't
go out of business when you need them most.

A partnership approach

A strong relationship will benefit both sides. You want your suppliers to acknowledge
how important your business is to them, so they make every effort to provide the best
service possible. And you're more likely to create this response by showing your
supplier how important they are to your business.

Identifying potential suppliers

You can find suppliers through a variety of channels. It's best to build up a shortlist of
possible suppliers through a combination of sources to give you a broader base to
choose from.

Recommendations

Ask friends and business acquaintances. You're more likely to get an honest
assessment of a business' strengths and weaknesses from someone who has used its
services.

Directories

If you're looking for a supplier in your local area, it's worth trying directories such as
Yellow Pages and Thomson.

Trade associations

If your needs are specific to a particular trade or industry, there will probably be a trade
association that can match you with suitable suppliers.

Business advisors

Local business-support organizations, such as chambers of commerce, can often point

you in the direction of potential suppliers. You can also contact our Strategic Information
Centre.

Exhibitions

Exhibitions offer a great opportunity to talk with a number of potential suppliers in the
same place at the same time. Before you go to an exhibition, it's a good idea to check
that the exhibitors are relevant and suitable for your business.

Trade press

Trade magazines feature advertisements from potential suppliers. You can contact our
Strategic Information Centre for a list of specialist trade magazines

Drawing up a shortlist of suppliers

Once you've got a clear idea of what you need to buy and you've identified some
potential suppliers, you can build a shortlist of sources that meet your needs.

When considering the firms on your shortlist, ask yourself the following questions:
  Can these suppliers deliver what you want, when you want it?
 Are they financially secure?
 How long have they been established?
 Do you know anyone who has used and can recommend them?
 Are they on any approved supplier lists from trade associations or government?

Do some research and try to slim your list down to no more than four or five candidates.
It's a waste of time for you and the potential supplier if you approach them when there's
little chance of them fulfilling your requirements.

Choosing a supplier

Once you have a manageable shortlist, you can approach the potential suppliers and
ask for a written quotation and, if appropriate, a sample. It's best to provide them with a
clear brief summarizing what you require, how frequently you'll require it and what level
of business you hope to place.

Get a quotation

It's worth asking potential suppliers to give you a firm price in writing for, say, three
months. You can also ask about discounts for long-term or high-volume contracts.

Compare potential suppliers

When you've got the quotation, compare the potential suppliers in terms of what matters
most to you. For example, the quality of their product or service may be most important,
while their location may not matter.

Price is important, but it shouldn't be the only reason you choose a supplier. Lower
prices may reflect poorer quality goods and services which, in the long run, may not be
the most cost effective option. Be confident that your supplier can make a sufficient
margin at the price quoted for the business to be commercially viable.

Check that the supplier you employ is the one that will be doing the work. Some
suppliers may outsource work to subcontractors, in which case you should also
investigate the subcontractor to determine if you are happy with this arrangement.

Wherever possible it is always a good idea to meet a potential supplier face to face and
see how their business operates. Understanding how your supplier works will give you a
better sense of how it can benefit your business.

And remember that your business' reputation may be judged on the labour practices of
your suppliers. It makes good business sense to consider the ethical dimensions of your
supply chain.

Negotiate terms and conditions

Once you've settled on the suppliers you'd like to work with, you can move on to
negotiating terms and conditions and drawing up a contract. See our guide on how to
negotiate the right deal with suppliers.

Getting the right supplier for your business

Know your needs

Make sure you know what you need. Don't be tempted by sales pitches that don't match
your requirements. Understand the difference to your business between a strategic
supplier, who provides goods or services that are essential to your business - such as
high-value raw materials - and non-strategic suppliers who provide low-value supplies
such as office stationery. You will need to spend much more time selecting and
managing the former group than the latter.

Spend time on research

Choosing the right suppliers is essential for your business. Don't try to save time by
buying from the first supplier you find that may be suitable.

Ask around

People or other businesses with first-hand experience of suppliers can give you useful
advice.

Credit check potential suppliers

It's always worth making sure your supplier has sufficiently strong cash flow to deliver
what you want, when you need it. A credit check will also help reassure you that they
won't go out of business when you need them most.

Price isn't everything

Other factors are equally important when choosing a supplier - reliability and speed, for
example. If you buy cheaply but persistently let down your customers as a result, they'll
start to look elsewhere.

Agree on service levels before you start

It's a good idea to agree on service levels before you start trading so you know what to
expect from your supplier - and they know what to expect from you. See our guide on
how to manage your suppliers.

Don't buy from too many suppliers...

It will be easier for you to manage - and probably more cost-effective - if you limit the
number of sources you buy from. This is particularly the case with low value-added
suppliers.

It's always worth having an alternative supply source ready to help in difficult times. This
is particularly important with regard to suppliers strategic to your business' success.