SUPPLY CHAIN MANAGEMENT IN HOSPITALITY INDUSTRY (HPC 8) 4 KEY ASPECTS OF SUPPLY CHAIN PLANNING

CHAPTER 1 – Basic Concepts and Overview of Supply Chain Management a. Demand Forecasting
✓ It involves analyzing historical data, market trends, and other relevant
1. Overview of Supply Chain
factors to estimate the quantity of products or services that will be needed.
2. Definition of Supply Chain
b. Production Planning
3. Component of Supply Chain
✓ It involves determining what, when, and how much to produce. It considers
4. Benefits of Supply Chain
available resources, production capacity, and lead times.
5. Function of Supply Chain
c. Supplier Collaboration
6. Factors Affecting Supply Chain Management
✓ Collaborating with suppliers is essential to synchronize the entire supply
7. Challenges of the Hospitality Industry Related to Supply Chain
chain network. This collaboration involves sharing information about
OVERVIEW OF SUPPLY CHAIN demand forecasts, production schedules, and inventory levels.
d. Risk Management
SUPPLY CHAIN MANAGEMENT IN THE HOSPITALITY INDUSTRY ✓ Developing risk mitigation strategies and contingency plans ensure the
includes all the activities involved in procuring, producing, and delivering customers’ supply chain can adapt to unforeseen challenges. This proactive approach
goods and services. This includes sourcing raw materials, manufacturing, storage, minimizes disruptions and helps maintain a steady flow of goods.
transportation, and distribution.
WHAT IS SUPPLY CHAIN? 2. PROCUREMENT
✓ Art and Science of obtaining Goods and Services
✓ It is the management of the flow of products and services, which begins at the ✓ It involves the systematic process of identifying, selecting, and acquiring
origin of products and ends at the product’s consumption. the necessary inputs from raw materials to finished goods from external
✓ It also comprises the movement and storage of raw materials involved in work sources.
progress, inventory, and fully furnished goods.
4 KEY ASPECTS OF PROCUREMENT
SIX COMPONENTS OF SUPPLY CHAIN MANAGEMENT
a. Strategic Supplier Selection
1. SUPPLY CHAIN PLANNING ➢ This process involves evaluating potential suppliers based on various
✓ It is the foundational element of the entire supply chain process, acting as criteria such as quality, reliability, cost, and geographical location.
the strategic conductor that orchestrates the movement of goods from the b. Contract Negotiation and Management
initial concept to the hands of the end consumer. ➢ Contract management is an ongoing process, ensuring that both parties
fulfill their obligations and that adjustments can be made to
accommodate market conditions or changes in business needs.
c. Supplier Relationship Management (SRM) 6. DISTRIBUTION AND FULFILLMENT
➢ It involves ongoing communication, collaboration, and performance ✓ It is the grand finale of the supply chain symphony, where products
monitoring. reach their ultimate destination – the hands of the end customer. This
➢ A robust SRM strategy goes beyond transactional interactions, fostering critical component involves a series of intricate processes aimed at
innovation and continuous improvement. ensuring that goods are delivered accurately, efficiently, and in a timely
d. Ethical and Sustainable Procurement manner.
✓ It ensures suppliers adhere to ethical labor practices, environmental
BENEFITS OF SUPPLY CHAIN MANAGEMENT
standards, and social responsibility.
1. Improved Collaboration
3. MANUFACTURING ✓ For businesses, information flow presents a significant issue. The
✓ It is a pivotal stage in the journey of a product from raw materials to absence of an automated flow of data across the supply chain results in
finished goods. a loss of sales. Integrated software solutions enable an easy exchange of
✓ It involves the transformation of inputs into tangible products, information, eliminating bottlenecks and giving a comprehensive view
embodying the creative and technical aspects of bringing a concept to of the supply chain.
life.
✓ Manufacturers serves as the creative epicenter where the raw materials 2. Better Quality Control
and components are carefully crafted and assembled to produce the final ✓ Companies gain from better quality control when they have more
product. control over not just their direct suppliers but also their supplier’s
suppliers. For example, implementing uniform minimum quality
4. LOGISTICS AND DISTRIBUTION standards helps direct providers to find and collaborate with secondary
✓ It is a pivotal component in the supply chain that focuses on the physical suppliers.
movement of goods from their origin to their final destination.
✓ This segment is like the supply chain’s arteries and veins, ensuring 3. Increased Efficiency Rate
products’ efficient flow across various touchpoints. ✓ Real-time information on the availability of materials and
manufacturing delays enables businesses to create a backup plan. This
5. WAREHOUSING AND STORAGE allows them to procure resources from secondary suppliers, preventing
✓ This crucial element is more than just a physical space to store goods, additional delays. Having a plan B results in easy management of
it’s a dynamic hub that plays a pivotal role in maintaining optimal resources in the supply chain.
inventory levels, facilitating order fulfillment, and ensuring the
seamless flow of products from manufacturing to distribution.
4. Increased Revenue Generation positives. An efficient SCM directly influences the flow of information,
✓ Supply Chain Management can be made more efficient by integrating products and related services.
various resources such as labour, materials, and related component,
making it advantageous to your company. This will also result in 9. Asset Utilization
increased revenue generation. ✓ Utilizing assets more efficiently enables businesses to implement
effective Supply Chain Management. Owners can evaluate and assess
5. Optimization of Logistics Distribution demand rather than update equipment. Organizations can assure
✓ The cost of logistics is significantly rising, impacting micro and small availability, minimize quality concerns, expedite product delivery, and
businesses alike. This can be seen in the United Kingdom, India and easily handle cases of returns.
other countries. Compared to your competitor, you could lower your
distribution expenses by using fewer channels of distribution. 10. Better Visibility and Data Analytics
✓ Using conferencing systems, shared dashboards, and mobile phone
6. Reduced Inventory and Overhead Cost applications, business owners can stay updated and continually
✓ An effective supply chain can decrease the need to maintain an communicate with their suppliers. Software technologies can also be
inventory, thereby saving overhead expenses for security and storage. used for this. With real-time data analytics, one can create a backup plan.
On the other hand, extremely poor inventory can strain distribution
FUNCTIONS OF SUPPLY CHAIN MANAGEMENT
systems and make them less resilient to supply chain shocks.
✓ If a company faces higher logistics expenses, switching to another 1. PURCHASING
supplier offering similar services can reduce costs. ✓ It is the process of buying materials needed to manufacture products.
These materials are purchased from suppliers, who must be able to
7. Enhanced Risk Mitigation deliver them by the manufacturer’s timeline.
✓ Large-scale and detailed supply chain data analysis can identify ✓ Therefore, the manufacturer’s companies and suppliers must
potential hazards, allowing businesses to create backup plans to react communicate and coordinate to ensure timely delivery of materials.
quickly to unforeseen events. Companies can also adopt proactive
methods rather than reacting to any disruptions, quality control matters, 2. OPERATIONS
or any other similar events as they arise. ✓ Is everything a company does on a day-to-day basis to run a company.
Before a company purchases the needed materials and begins
8. Strong Cash Flow production, it must forecast demand for its products. Accurate
✓ Any disruption in the supply chain has a domino effect that affects every forecasting must align with inventory management and production
junction throughout the supply chain. However, it is also true with the schedules to ensure that the company is operationally positioned to
 manufacture the right amount of product to meet the needs of unpredictable weather patterns, resulting in everything from severe
consumers. natural disasters to resource shortages.
✓ Managers cannot overlook the impact the changing environment will
3. LOGISTICS have on sustainable supply chains, whatever the location or line of
✓ It is a function that involves the coordination of all supply chain business.
activities, such as warehousing, inventory management, and
transportation. Companies along the supply chain must communicate 2. SUPPLY CHAIN MANAGEMENT
effectively to ensure that products reach consumers in a timely and ✓ Supply CM involves everything from material sourcing and logistics to
efficient way in the precise form that the consumer expects. distribution and delivery to the customer.
✓ Where SCM is not correctly implemented, the supply chain will suffer
4. RESOURCE MANAGEMENT from redundancies, decreased efficiency, delays, and a failure in
✓ It is the planning, organizing, and controlling of resources. Resources meeting customer requirements.
include the labor, the raw materials, and the technology that are required
to move products from their raw material phase to finished goods 3. TECHNOLOGY
available for consumption. ✓ It holds the solution to so many challenges facing the supply chain, BUT
✓ Effective supply chain management requires the right allocation of these IF IT’S NOT implemented correctly, or the right technology is not
resources to the right supply chain activities to optimize the entire matched to the individual supply chain, then it can become more of a
system. hindrance than a help.
✓ Supply chain technology provides stakeholders with real-time access to
5. INFORMATION FLOW operations which is hugely beneficial for addressing any potential
✓ Information workflow is a supply chain management function that factors that might disrupt the supply chain.
relates to what and how information moves between members of the
supply chain. If information doesn’t flow effectively or communication 4. SKILL’S SHORTAGE
is poor, the entire process can suffer as a result of disruptions, delays, ✓ In 2018, before the disruption of Covid-19, alarms were already
and mistakes. sounding about the ‘severe talent shortages’ of supply chain
professionals in manufacturing, retail, logistics, and more. Some of
FACTORS AFFECTING SUPPLY CHAIN MANAGEMENT
the prevalent skills shortages are in the field of modelers, data
1. CLIMATE CHANGE engineers, and data scientists – largely because of the speed at which
✓ According to NASA, more than 97% of climate scientists agree on one technology is developing.
thing: climate-warming trends over the past century are extremely likely
due to human activities. The global climate crisis is creating much more
 5. POOR FORECASTING further exacerbated by geographical barriers, lack of reliable courier
✓ A sudden spike in demand, or not anticipating a drop in demand, can services, or unexpected disruptions like bad weather.
leave managers with an under- or oversupply of inventory, resulting
Several key points underline this issue:
in massive losses.
✓ Supply chain managers need to keep a handle on so many factors that a. The need for specialized transportation: Fragile items like wine
can impact product demand such as market trends, seasonality, and glasses or perishable products require special handling during
customer expectations. But even the most experienced manager transit.
couldn’t necessarily foresee a global pandemic or blockage in trade b. Last-minute requirements: Sudden demands for extra supplies may
routes. necessitate swift delivery solutions which are often expensive.
c. International shipping complications: Cross-border shipments bring
CHALLENGES OF HOSPITALITY IN RELATED TO SUPPLY CHAIN
along layers of legal formalities and higher risks.
1. Understanding High Demand but Limited Supply Challenges
✓ A major snag in hospitality supply chain management is wrestling with 4. The Ripple Effect of Inflation Rates on Hospitality Services
high demand versus limited supply. Peak seasons can bring in a surge of ✓ The rising costs due to inflation are an ever-present concern for the
patrons and create mass demand for products or services. hospitality industry’s supply chain. When economies face an uptick in
✓ However, if the supply cannot keep pace due to constraints like supplier inflation rates, it increases operational expenses across the board.
shortages or manufacturing hold-ups, it results in a wide gap that harms a. Higher Purchase Costs: Suppliers may hike the prices of goods or
both business revenues and your reputation amongst clients. services supplied as they grapple with their own increased production
costs.
2. Exploring Vendor Reliability Issues and their Impact on the Industry b. Increased Transportation Charges: A spike in fuel price impacts
✓ A hospitality company’s reputation often hinges on its ability to supply freight charges, leading to more expensive deliveries.
consistent service. This is where vendor reliability comes into play as a c. Elevated Labor Expenses: As general living expenses rise, so do wage
crucial determinant of successful operation. However, unreliable demands, prompting higher manpower costs.
vendors pose a significant issue, leading to inadequate stocks or late
deliveries contributing to subpar guest experiences. 5. Diving Deep into Compliance and Legal Roadblocks in Supply Chains
✓ Compliance with varying laws, regulations, and norms is another hurdle
3. Unpacking Transportation and Logistic Hurdles within the Hospitality plaguing the hospitality industry’s supply chain. From abiding by
Sector environmental standards to ensuring safety measures during
✓ Transportation troubles are another setback in the hospitality industry’s transportation or adhering to international trade laws for transnational
supply chain, often leading to delays or damaged goods. This can be businesses – This legal landscape can be a minefield.
 For example: A. FORECASTING
✓ Decisions of the supply chain management are dependent upon
a. Environmental Standards: Sourcing sustainable products may
estimates defining which goods are required, what quantity, and when
increase costs but it ensures compliance with green hospitality
these products are required. Demand prediction is the foundation of any
principles that are growing in prominence.
business toward proper planning to satisfy consumer demand. Both
b. Safety Regulations: Ensuring your vendors adhere to safe packaging
predictions are made up of four primary factors to assess the market
and transport practices ensures a risk-free delivery process.
conditions.
c. International Trade Laws: For hotels operating globally, respecting
local trade agreements maintains good business standing while They are the following variables:
preventing potential litigation issues.
• SUPPLY – This refers to the total demand for goods on the market.
CHAPTER 2 – Supply Chain Operations: Planning and Sourcing • DEMAND – This refers to the amount of product available.
1. Supply Chain Operations: Plan and Source • PRODUCT CHARACTERISTICS – This refers to the product features that
2. PLAN: Categories of Supply Chain Operators influence demand.
3. SOURCE: Categories of Supply Chain Operators • COMPETITIVE ENVIRONMENT – This refers to the actions of product
suppliers in the market.
SUPPLY CHAIN OPERATIONS: PLAN AND SOURCE
FORECASTING METHODS IN SUPPLY CHAIN
➢ By routine or continuous processes, a supply chain carries out the job. Thesare
the processes at the center of every supply chain called “nuts and pins”. ➢ When making predictions, there are FOUR SIMPLE APPROACHES to use.
The bulk of projections are made using variations of the four processes.
SIMPLIFIED MODEL IDENTIFIES 4 TYPES OF OPERATIONS
METHODS
1. PLAN
2. SOURCE 1. Qualitative – It is founded on an individual’s intuition or beliefs.
3. MAKE 2. Causal – It assumes that there are many conditions in connection with demand.
4. DELIVER 3. Time Series – It is based on trends of traditional demand.
4. Simulation – It combines cause and time series procedures.
PLAN: CATEGORIES OF SUPPLY CHAIN OPERATIONS
➢ The preparation phase is the beginning of the supply chain operation. B. AGGREGATE PLANNING
➢ In this phase, the program’s key goal will be the. development of a method ✓ The next step is to establish an overall supply strategy to satisfy the
to maximize benefit. The planning phase applies to all activities required in the demand for the commodity, as demand prediction is established. In
other FOUR CATEGORIES to plan and coordinate the operations. designing an aggregate supply plan,
THREE FUNDAMENTAL APPROACHES are required: THREE KINDS OF INVENTORY PLAN
1. Use Production Capacity to Meet Demand 1. Cycle Inventory – The inventory is necessary for fulfilling commodity
✓ Align production capacity to satisfy demand by adding/removing requirements during the interval between ordering for the product.
production capacity to use 100% of its capacity. 2. Safety Inventory – This happens when, in expectation of potential demand, an
organization or supply chain with a certain profitable capability plans to
2. Use Varying Levels of Total Production Capacity manufacture and store goods.
✓ As appropriate, intend to retain increased production capacity as 3. Seasonal Inventory – The volatility in a supply chain must be compensated. In
required to satisfy projected demand. general, the greater the degree of uncertainties, the higher the degree of
protection required.
3. Use Inventory and Work-In-Progress Inventory
SOURCE: CATEGORIES OF SUPPLY CHAIN OPERATIONS
✓ Develop new inventories to support the projected potential demand to
meet demand. ➢ The next phase is creation or procurement after planning.
➢ At this point, we concentrate primarily on maintaining a close partnership with
C. PRODUCT PRICING PLANNING suppliers of essential raw materials.
✓ The use of prices can affect demand over time in businesses and whole ➢ This includes not only the identification of reliable suppliers, but also the
supply chains. Market and salespeople typically want to optimize price determination of various ways of arranging for shipping, supply, and payment.
choices to boost profit. A firm has to decide how to price its products to ➢ In this phase, supply chain managers must then build with their vendors a
maintain profit and balance demand during low periods or high sales collection of pricing, supply, and payment systems and, therefore, develop the
seasons. Prices affect demand cycles for peak and slow times. methods to maintain the partnerships and improve them.

D. INVENTORY PLANNING A. PROCUREMENT

✓ INVENTORY MANAGEMENT is a group of strategic activities used ✓ Traditionally, the key duties of a purchasing manager are to overcome
to control inventory levels in a supply chain while determining the the price of possible vendors and then purchase goods from the cheapest
quantities needed for the restocking process. The objective is to reduce supplier.
inventory costs and to optimize inventory levels. Effective inventory ✓ Procurement is the acquisition procedure used by an organization to
management plans consider product demand and integrate those into the obtain the required products and services.
supply chain for finished or unfinished products.
FIVE PROCUREMENT ACTIVITIES
1. Purchasing
✓ A business buys two categories of goods:
 1) direct or strategic material used to manufacture the products it B. Credit And Collections
provides to its clients, and ✓ Credit and collections are the means of obtaining the funds a business
2) indirect maintenance, repair, and service (MRO) supplies used needs. The credit operation checks prospective clients to ensure that the
by the company in everyday operations. firm is only dealing with customers that can afford their bills. The
running of the collections gives the money the business has won.
2. Consumption Management ✓ Good handling of credit attempts to meet customers’ product
✓ Effective sourcing starts by recognizing the number of goods being requirements and, thus, minimizes cash on claims. This is similar to
acquired in each business unit and the whole enterprise. It must be those of good stock management, the demand of customers is met and
understood how many items are purchased by where and at what cost. the amount of money attached to stock reductions is minimized.
✓ The supply chains in which an enterprise is involved are also chosen by
3. Vendor Selection credit decisions. Most of the confidence and collaboration between
✓ Just based on the strategic strategy and the operational model of the businesses dependent on strong credit ratings and prompt invoice
organization, the importance of product quality, service standards, fair- payments are possible. The decisions on lending influence the
in-time distribution, and technical support can be calculated. individual and the terms of sale of a business.
THREE CREDIT AND COLLECTION ACTIVITIES
4. Contract Negotiation
✓ This is where the individual goods, pricing, and standards of service are 1. Set Credit Policy
created. Contracts to procure indirect goods are easiest negotiated where ✓ Senior management such as the auditor, the chief financial officer, the
vendors are chosen at the lowest price. treasurer, and the chief executive officer develop credit policies. The
✓ The most complicated agreements include arrangements for the first phase is an analysis of the company’s debts results.
procurement of direct facilities that follow high-quality expectations ✓ The following move would be to set or adjust the conditions for approval
that require a high degree of operation and technological assistance. of risks to satisfy the status of business claims.

5. Contract Management 2. Implement Credit and Collection Processes

✓ An organization has the opportunity to monitor its suppliers’ output and ✓ These operations include the implementation and operation of protocols
keep them responsible for meeting the quality of service negotiated in to implement and implement the company’s credit policy. Collect
its contracts. payments for the goods sold by the corporation through salespeople and
✓ Similarly, individuals in an enterprise need to gather information clients.
regularly about suppliers’ results. Any provider regularly falling behind
standards should be informed of and asked to remedy the deficiencies.
 3. Manage Credit Risk ➢ They define mainly how the supply chain should transform its activities
✓ This checks for opportunities to reduce the cost to potential buyers to to satisfy changing demand on the market.
sellers. Create credit systems and finance programs that meet consumer
requirements. Analyze and review customer credit ratings over time. 2. How Capacity is Allocated in Each Facility
➢ Decisions on capacity utilization results in the equipment and labor that
CHAPTER 3 – Supply Chain Operations: Making and Delivery
are employed at the facility. So the distribution of capacity until
MAKE: CATEGORIES OF SUPPLY CHAIN OPERATIONS determined greatly influences the efficiency and viability of the supply
chain.
A. Product Design
➢ Product design and component specifications are dependent on the 3. The Allocation of Supplies and Markets to Each Facility
current technologies and product specification requirements. ➢ The facility needs different types of supplies and the goods and
➢ When approaching product design from a supply chain, standpoint, the quantities it can allow and accommodate can serve certain types of
goal is to design products with fewer components, simple structures and industries depending on the position that the facility performs and the
modular fabrication from common sub-assembles. capability it has.

B. Product Scheduling DELIVER: CATEGORIES OF SUPPLY CHAIN OPERATIONS

➢ When market dynamics adjust, product scheduling becomes a constant
Goods are shipped by the retailer to the consumer at their destination. This is
balancing act.
essentially the logistics points where consumer orders are approved and suppliers are
➢ The output scheduling operation is a method of finding the best possible
prepared for delivery.
compromise between many opposing goals.
RULES OF ORDER MANAGEMENT
C. Facility Management
1. Enter the Order Once and Only Once
➢ Both decisions on facilities management are taken under the limits
➢ Capture the order as similar as possible to the original source remotely.
imposed by decisions on the sites of facility..
Do not return the order manually.
➢ Facility management of the installation takes place as a given location
and works on how best to leverage existing power.
2. Automate Order Routing
DECISION NEED TO BE TAKEN IN THREE AREAS: ➢ Send orders immediately to convenient delivery points. People only
handle exceptions.
1. The Role Each Facility will Play
➢ This includes actions that decide the operations in which services can
be carried out.
 3. Make Order Status Visible RETURN PROCESSING
➢ Allow consumers and service agents to immediately view the details on
➢ Reverse logistics
the order status if they choose to.
➢ This is essential since recycled items are returned, and after online e-
commerce transactions, products are returned as well.
4. Use Integrated Order Management Systems
➢ Returning processing can be efficient but at the same time, note that
➢ To protect data integrity, associate order management systems
there is no need for much return processing if all supply chain operations
electronically with other similar systems.
are successfully handled.
DELIVERY SCHEDULING
1. Direct Deliveries
➢ This deliveries schedule includes recommendations on the amount of
delivery to the individual locations and the pace of delivery. The benfits
of this distribution system are the ease of procedures and the scheduling
of delivery.

2. Milk Run Deliveries

➢ Planning milk supply is a much more difficult job than preparing direct
supplies. Decision must be taken about the supply volumes of various
materials; the frequency of supply and above all, the routing and
sequencing of pickups and supplies.
SOURCES OF DELIVERIES
1. Single-Product Location
➢ These include plants and warehouses that are available for shipping in a
particular commodity or a narrow selection of similar products.

2. Distribution Centers
➢ There are warehouses in which bulk commodities are transported from
single-product locations.