SUPPLY CHAIN

MANAGEMENT IN
HOSPITALITY
INDUSTRY
 Chapter 1
Basic Concept and Overview

of Supply Chain Management

 Introduction
The Concept of Supply Chain management varies from that of
the conventional logistic concept. Logistics generally refers to
operations within one organization's territory and supply chains
to networks of ogranizations that operate together and
coordinate their actions for business distribution. Traditional
logistics also concentrate on sourcing, delivery, repair and
material control operations. Management of the supply chain
recognizes all conventional logistics and practices such as
marketing, manufacturing of new products, finance, and
customer support.
 Learning Objectives

1. describe what supply chain is and what is does in the hospitality

industry

2.
discuss the features, benefits, and functions of supply chain
management;
 Learning Objectives

3. identify the factors affecting the supply chain in the hospitality

industry, and;

4.
enumerate the challenges of the hospitality industry related to
the supply chain
 Overview
In today's competitive environment, there is an increasing
interest in logistics and supply chain management
techniques since performance is measured not only by
actions and decisions, but also by increases in return on
investment and better profitability. Even though logistics
and supply chain considered operations management
techniques in the hotel and other service sectors, they may
assist in adding value to their properties.
 Overview
The hospitality business is a broad group of industries
within the service sector encompassing hotels, restaurants,
event organising, theme parks, transportation, cruise lines,
and other tourism-related professions. The hotel business
is a multibillion dollar industry heavily reliant on the
availability of leisure time and disposable money.
 Overview
The supply chain is very important in the hotel and catering
industries. Employees in this sector must maintain consistent
connections with suppliers and work with a solid ordering system to
enhance customer service. Innovative hospitality chains look beyond
inventory management systems to spend intelligence solutions that
can assist, collect, rationalize, and analyze historical and real-time
buying data. The development of supply chains leads to more
excellent knowledge of the whole chain, making the adoption of
common standards more straightforward. It is implicit and apparent
that in the future age of hyper-competition, the foundation of rivalry
in many sectors would center upon supply chain growth.
 What is Supply Chain?
• A supply chain is a network of suppliers,
manufacturers, assemblers, supply and delivery
centers, and logistics installation that perform
functions such as material sourcing, processing, and
shipment to buyers of those materials of an
intermediate or finished product.

• A supply chain is the lineup of companies that market

goods and services
 What is Supply Chain?

• All stages, directly or indirectly, involved in the

fulfillment of a consumer order have a supply chain.
Not only the manufacturers but also the shipping
providers, warehouses, dealers, and consumers
themselves are involved in this supply chain.
 Essential Features of Supply Chain
Management
............ ..............

Supply chain management (SCM)

integrates stakeholder integration
Integrated Behavior between the client and the provider
 Essential Features of Supply Chain
Management
............ ..............

In particular for planning and

surveillance processes, an efficient
Mutually Sharing Information SCM exchange of information
between channel participants is
needed.
 Essential Features of Supply Chain
Management
............ ..............

Effective SCM often includes

Mutually Sharing Channel Risk and
Rewards
reciprocal channel risks and
incentives to have a competitive
benefit. The long-term emphasis
and coordination between supply
chain participants should be risk-
sharing and reward-sharing.
Essential Features of Supply Chain
Management
............ ..............
The successful SCM requires
cooperation between channel
participants. Cooperation refers to
Cooperation the company's coordinated,
identical or complementary
operations in an enterprising
relationship, in order to achieve
collectively reckoned, superior
results.
 Essential Features of Supply Chain
Management
............ ..............

Supply Chain is effective where all

supply chain members serve
Focus on Serving Customers consumers with the same objective
and concentration. A mode of
policy convergence has the same
aim and focal point for supply
chain members.
Essential Features of Supply Chain
Management
............ ..............
Implementing SCM requires the
convergence of systems from the
supply chain to production and
Integration Processes delivery. Integration can be
achieved under cross-functional
conditions, by staff of plant
suppliers and services provided by
third parties.
 Essential Features of Supply Chain
Management
............
Partners to Build and Maintain
Long-term Relationship
..............
The objective of successful partnerships
is to merge channel policies to reduce
duplication and overlap in the search for
a degree of cooperation that makes
partners more efficient at lower costs.
Integration of policies is possible if the
chain members have clear cultures and
management strategies.
 Benefits of Supply
Chain Management
• Builds stronger partnerships and support with clients
• Provides better distribution processes, with less delay,
for demanded goods and services
• Increase efficiency and functions for companies
• Lowers shipping and warehouse costs
• Eliminates cost directly and implicitly
 Benefits of Supply
Chain Management
6. Supports the shipping at the right spot with the right
goods
7. Enhances asset management and encourages the
effective implementation of just-in-time inventory models.
8. Assist businesses in responding to global dynamics,
economic, upheavals, growing market preferences, and
associated disparities.
9. Assists businesses in the supply chain to reduce
duplication, eliminate risks, and achieve efficiency.
Function of Supply Chain
Management
• Strategic Level
• Strategic network optimization involving warehouse,
fulfillment center and facilities numbers, locations , and
scale.
• Strategic relationships, contact networks for crucial details,
and technological enhancements such as cross-docking,
exporting directly, or logistics with third parties (with
vendors, dealers, and consumers)
Function of Supply Chain
Management
• Strategic Level
• Management of inventory life cycles to optimally combine
new and current goods in the supply chain and capacity
management.
• Chain operations for information technology
• Coordination of the whole corporate plan with the strategy
of supply.
Function of Supply Chain
Management
2. Tactical Level
• Sourcing and other procurement decisions
• Decisions on production including the concept of contracts,
schedules, and plans for the operation
• Purchasing choices including inventory size, location and
consistency
• The strategy of transport including pace, routes, and
contracting
• Competition benchmarking of all processes including best
practices around the business
Function of Supply Chain
Management
2. Tactical Level
• Fees with milestones
• Customer demand and customer habits focus
Function of Supply Chain
Management
3. Operational Level
• The coordination of the allocation of daily output for each
production plant in supply chain (minute by minute)
• Preparation and forecasting of demand, alignment of all
customer's needs, and prediction- and provision-sharing
with all suppliers
• In coordination with all vendors, the supply preparation,
including existing inventories and forecast demands.
• Inbound activities including retailer transport and shipment
receipt.
Function of Supply Chain
Management
3. Operational Level
• Production processes involving materials use and finished
products streaming
• Outbound operations, all tasks including customer efficiency,
warehousing, and transport
• Pledging orders for all retailers, production, fulfillment center,
and other clients on all restrictions within the supply chain.
• All cases of transit distruption from manufacturing level to
supply and plan for consumer payment through retention of
business losses by the insurance provider
 Factors Affecting Supply
Chain in Hospitality Industry
• The hotel's customer or guest is referred to as "GOD". When it
comes to strict uniformity, it may be difficult at times. Customer
satisfaction is critical in the hotel industry.
• Management systems of different types, such as hotel
operators, franchisees, chain hotels, and so on, are various
control systems that have varied implication on the supply
chain management.
• Current market trends indicate that computerized property
management systems are utilized but solely for front office
administration and reservations.
 Challenges of Hospitality
Industry Related to Supply Chain
• Raw Materials Costs - The cost of purchasing raw materials in
the hotel industry is prohibited.
• Material Ordering Costs- Individual agencies often utilize
handwritten indents and transactions independently.
• Inventory Handling. The required product forecast is very
uncertain. It turns into a paper tiger even after it is done.
• Emergency Purchases. Due to lack of preparation, emergency
purchases are the norm rather than the exception.
 Chapter
Summary
Supply chain management can be described as managing
flow of goods and services that starts from the origin and
ends at the consumption of the product. It also involves the
movement and storing of raw materials, inventory and
professionally equipped materials. The principal purposes of
supply chain management is to track and link the product
and service production, delivery and sipping. Companies
that possess very strong stocks, manufacturing, distribution,
internal manufacture, and sales will do this.
 Chapter
Summary
Management of the supply chain tends to a company's financial
performance. Integrated behavior, reciprocal knowledge
exchange, mutually managed risk and benefits, cooperation,
customer service, integration processes, and stakeholders are
important aspects of supply chain management to establish
and sustain long-term relationships. It is meant to maximize
differentiation, boost profits, and enter new markets for
leading businesses utilizing the supply chain. The aim is to
promote competitive advantage and shareholder value.
 Chapter
Summary
The strategic level, tactical level , and operational level are
three major roles of supply chain management.

In the hospitality sector, supply chain management is somewhat

different from other sector. Capital costs for industries are high
and operational costs are relatively low.

Room material prices, sourcing materials, product

manipulation, and emergency acquisitions are different
probems in the hopitality sector in the field of the supply chain.
 Chapter 2
Supply Chain Operations:

Planning and Sourcing

 Introduction
The supply chain management mechanism is used by
businesses to ensure a reliable and economical supply chain.
The supply chain consists of a series of steps a business takes
to make raw materials a finished product. With the diverse
needs and wants of the customers in the hospitality industry,
the supply chain operations change and align with fast-paced
requirements of the industry to plan, source, make, and deliver.
 Learning
Objectives

1. gain a conceptual appreciation of the business activities that

drive supply chain operations;

2.
exercise a high-level understanding of activities involved in
supply chain planning and sourcing;
 Learning
Objectives

3. identify the basic concepts of demand forecasting and

inventory management and;

4.
begin to asses how well these activities operate within the
hospitality industry
 Supply Chain Operations:
Plan and Source

By routing or continuous process, a supply chain carries out the

job. These are the processes at the center of every supply
chain called "nuts and pin". To explain these operations at a
high level and how they are linked, the simplified model
identifies four types of operations:
1. Plan
2. Source
3. Make
4. Deliver
 PLAN
• Demand Forecasting
• Product Pricing
• Inventory
• Management

DELIVER
• Order Management
• Delivery Scheduling
SOURCE
• Process Returns
• Procurement
• Credit and Collection

MAKE
• Product Design
• Production Scheduling
• Facility Management
 PLAN: Categories of Supply
Chain Operations
The preparations phase is the beginning of the supply
operation. We need to build a road map or approach to deal
with how goods and services meet consumer's requirements
and needs. In this phase, the key goal of the program will be
the development of a method to maximize benefit. A policy
must be developed by organizations to manage all the tools
necessary to design goods and deliver services. The core focus
in supply chain management is on the preparation and
development of several indicators.
PLAN: Categories of Supply
Chain Operations

The planning phase applies to all activities required in the other

three categories to plan and coordinate the operations. In this
group, we will examine three operations in some detail:
forecasting, aggregate planning, product pricing planning, and
inventory management plan.
 PLAN: Categories of Supply
Chain Operations
A. Forecasting
Decision of the supply chain management are dependent upon
estimates defining which goods are required, what quantity,
and when these products are required.
They are the following variables:
• Supply
• Demand
• Product Characteristics
• Competitive Environment
 PLAN: Categories of Supply
Chain Operations
Forecasting Method in Supply Chain
When making predictions, there are four simple approaches to
use. Listed below are the methods:
• Qualitative
• Causal
• Time Series
• Simulation
 PLAN: Categories of Supply
Chain Operations
B. Aggregate Planning
The next step is to establish an overall supply strategy to
satisfy the demand for the commodity, as demand prediction is
established. In designing an aggregate supply plan, three
fundamental approaches are required:
• Use production capacity to meet demand
• Use varying levels of total production capacity
• Use inventory and work-in-progress inventory
 PLAN: Categories of Supply
Chain Operations
C. Product Pricing Planning
The use of prices can affect demand over time in business and
whole supply chains
Is it the safest way to promote products in PEAK times to
maximize revenues or offset costs in SLOW periods?

PEAK cycles, where companies can differ SLOW times, where businesses
rapidly between workforce and cannot shift saff and performance
capability
easily
SOURCE: Categories of Supply
Chain Operations
Operations in this group provide the required operations to
gain feedback for the production of goods and services. We are
looking at two activities here. First is sourcing. Second choice,
credit and collections.
A. Procurement
Traditionally, the key duties of a purchasing manager are to
overcome the price of possible vendors and then purchase
goods from the cheapest supplier.
SOURCE: Categories of Supply
Chain Operations
Five Procurement Activities
• Purchasing
• Consumption Management
• Vendor Selection
• Contract Negotiation
• Contract Management
SOURCE: Categories of Supply
Chain Operations
B. Credit and Collections
Credit and collections are the means of obtaining the funds a
business needs.
Good handling of credit attempts to meet customers' product
requirements and, thus, minimizes cash on claims.
The supply chains in which an enterprise is involved are also
chosen by credit decision. Most of the confidence and
collaboration between businesses dependent on strong credit
ratings and prompt invoice payment are possible. The decisions
on lending influence the individual and the terms of sale of a
business.
SOURCE: Categories of Supply
Chain Operations
Three Credit and Collections Activities:
• Set Credit Policy
• Implement Credit and Collection Processes
• Manage Credit Risk
 Chapter Summary
The control of the supply chain is a mechanism used by
businesses to maintain a reliable and economic Supply
chain.

The company's supply chain activities can be divided into

four main categories: (1) the plan; (2) the source; (3) the
make; (4) the delivery