SCMH PRELIM 2.

Efficiency - Enhance network efficiency by

streamlining processes and reducing costs
Introduction to Supply Chain Management
through data analysis and real-time
 In the hospitality industry, supply chain
inventory management, leading to better
management is crucial for success. It involves
profitability.
managing the flow of goods, information, and
3. Resilience - Build a resilient supply chain
finances across the entire network, from
capable of managing disruptions through
suppliers to customers. By optimizing this
risk management, forecasting, and
process, hospitality businesses can improve
contingency planning to maintain
efficiency, reduce costs, enhance quality, and
performance and customer satisfaction.
ultimately, create a better experience for their
4. Sustainability - Focus on environmental
guests.
impact by implementing sustainable
Supply Chain
practices and ethical sourcing, meeting
 A supply chain is a system involving
customer and regulatory demands for
organizations, people, technology, and
reduced carbon emissions.
processes that move products from suppliers to
5. Collaboration - Foster strong relationships
customers.
and communication with suppliers and
 It includes a network of retailers, distributors,
stakeholders, utilizing technology to
transporters, storage facilities, and suppliers,
improve visibility and ease negotiations.
managing the flow of goods, information, and
Objectives of Supply Chain Management
funds from raw materials to the final product
 Supply chain management must be efficient and
delivered to the customer.
cost-effective across the entire system, focusing
 It connects a business with its suppliers and
on minimizing transportation, distribution, and
customers.
inventory costs through a holistic, systems-
 The supply chain, which is also referred to as the
based approach.
logistics network, consists of suppliers,
1. Enhancing Customer Service - Improve
manufacturing centers, warehouses, distribution
satisfaction by ensuring timely and accurate
centers, and retail outlets, as well as raw
deliveries.
materials, work-in-process inventory, and
2. Expanding Sales Revenue - Increase revenue
finished products that flow between the
through efficient supply chain operations
facilities.
and better customer service.
Supply Chain Management
3. Reducing Inventory Cost - Reduce expenses
 Supply chain management (SCM) manages the related to storing and managing inventory.
flow of materials, information, and finances from 4. Improving On-Time Delivery - Ensure
suppliers to consumers, coordinating this flow products are delivered to customers as
within and between companies. It includes: scheduled.
- Planning and managing - Sourcing, 5. Reducing Order to Delivery Cycle Time -
procurement, conversion, and logistics. Shorten the time from order placement to
- Coordination - With suppliers, customers, delivery.
and other partners. 6. Reducing Lead Time - Reduce the time
- Integration - Connecting business functions required to produce and supply goods.
like logistics, manufacturing, marketing, and 7. Reducing Transportation Cost - Decrease
finance. expenses associated with moving goods.
Goals of Supply Chain Management 8. Reducing Warehouse Cost - Lower the costs
1. Customer Satisfaction - Achieve high of storing and managing inventory in
customer satisfaction by meeting demand, warehouses.
ensuring product quality, and maintaining 9. Reducing Supplier Cost - Simplify the supply
reliable delivery. Effective forecasting and chain by working with fewer, more reliable
supplier management are crucial. suppliers.
 10. Expanding Depth of Distribution - Increase effective resource use, leading to better
the range and reach of distribution channels. profit margins.
Advantages of Supply Chain Management in the 5. Improved Collaboration - Effective supply
Hospitality Industry chain management in hospitality ensures
 In the hospitality industry, supply chain smooth interaction among vendors,
management (SCM) helps reduce risks, distributors, and service providers. This
manage demand, and meet customer coordination helps maintain high service
expectations. It enhances product quality, standards and consistent guest experiences,
minimizes waste, and improves operational such as through a centralized procurement
efficiency. By monitoring the supply chain system that provides uniform quality
effectively, businesses can address issues supplies across a hotel chain.
early, leading to long-term savings and 6. Minimized Delays - Efficient supply chain
reduced costs. practices in hospitality prevent delivery
Benefits of Supply Chain Management in the Hospitality delays and logistical errors, ensuring timely
Industry service. This includes prompt cleaning and
1. Enhanced Efficiency - Implementing supply stocking of hotel rooms and uninterrupted
chain management, including integrated food and beverage service in restaurants.
logistics and innovative practices, enables 7. Strengthened Supply Chain Network -
businesses to better anticipate and respond Integrating lean and agile practices with
to market demands. This dynamic strategic planning enhances supply chain
adaptability is crucial for navigating efficiency and sustainability in hospitality.
economic fluctuations, emerging trends, and Lean practices reduce waste and optimize
shorter product lifecycles. resources, while agile practices enable quick
2. Cost Reduction - SCM helps reduce costs in adaptation to demand changes and
several areas: disruptions, improving operational resilience
- Enhances inventory management. Role of Supply Chain Management in Hospitality
- Optimizes storage to prevent damage. Industry
- Improves responsiveness to customer  Supply Chain Management (SCM) plays a
needs. crucial role in the hospitality industry,
- Strengthens relationships with impacting various aspects of operations and
distributors and vendors. customer satisfaction. Here's an overview of
3. Increased Output - In the hospitality its key roles and benefits:
industry, combining lean and agile practices 1. Efficient Resource Management - SCM
with strategic planning enhances supply helps in managing the flow of resources
chain efficiency and sustainability. Lean from raw materials and ingredients to
practices reduce waste and optimize finished products, ensuring that hotels,
processes, while agile practices enable quick restaurants, and other hospitality
adaptation to changes in demand or supply services have the necessary supplies
disruptions, improving operational resilience when they need them. This minimizes
and sustainability. waste, reduces costs, and maintains high
4. Higher Profit Margins - Adopting advanced service standards.
technologies and enhancing cross- 2. Cost Reduction - By optimizing
departmental collaboration in hospitality procurement processes, negotiating
businesses can reduce costs and boost better terms with suppliers, and
revenue. Technologies like inventory reducing inventory costs, SCM can
management systems and automated significantly cut operational expenses.
ordering help minimize waste and optimize Effective SCM strategies help in
stock, while improved collaboration ensures managing costs related to procurement,
storage, and distribution.
3. Improved Quality Control - Effective 9. Technology Integration - Modern SCM
supply chain practices ensure that high- utilizes technology such as inventory
quality products and services are management systems, real-time
consistently delivered. This involves tracking, and data analytics to enhance
selecting reliable suppliers, monitoring efficiency and decision-making. This
product quality, and maintaining technological integration allows for
stringent standards throughout the better forecasting, planning, and
supply chain, which is vital for coordination across the supply chain.
maintaining customer satisfaction in the 10. Supplier Relationships - Building strong
hospitality industry. relationships with suppliers is a key
4. Enhanced Customer Satisfaction - A component of SCM. Effective
well-managed supply chain ensures that communication and collaboration with
customer demands are met promptly suppliers can lead to better terms,
and accurately. By having the right improved service levels, and innovations
products available at the right time, that benefit both parties.
hospitality businesses can provide better Flow of Supply Chain
service, meet customer expectations,  The supply chain flow emphasizes the
and enhance their overall experience. process and movement of goods,
5. Timely Delivery - SCM ensures that information, and resources through
goods and services are delivered on different stages to ensure that products are
time, which is critical for hospitality delivered efficiently and effectively to
operations that depend on timely consumers.
inventory replenishment. Delays in Supply Chain Management Flow
supply can lead to service disruptions,  Sale and Product - The flow begins with sales
which can negatively impact guest and product strategy, which involves
experiences. understanding market demands and
6. Inventory Management Effective - SCM consumer needs. This step focuses on
practices help in maintaining optimal defining the product or service based on
inventory levels, reducing the risk of consumer insights and market research. Key
overstocking or stock outs. This is Aspects:
particularly important in the hospitality 1. Market Research - Identifying customer
industry where the timely availability of preferences, trends, and competitive
products can directly affect service landscape
quality and operational efficiency. 2. Product Strategy - Deciding on product
7. Risk Management - SCM includes features, pricing, and positioning.
assessing and mitigating risks related to 3. Sales Forecasting - Estimating future
supply chain disruptions. By developing sales to align production and inventory
contingency plans, diversifying needs.
suppliers, and ensuring robust logistics,  Product Development - Once the product
hospitality businesses can better handle concept is defined, the next step is product
unforeseen events such as natural development. This involves designing and
disasters or supply shortages. creating the product based on the identified
8. Sustainability - SCM in the hospitality needs and specifications. Key Aspects:
industry can contribute to sustainability 1. Design and Prototyping - Creating initial
goals by incorporating eco-friendly product designs and prototypes.
practices, such as reducing waste, 2. Testing - Evaluating the product for
sourcing local and sustainable products, quality, functionality, and market fit.
and improving energy efficiency in 3. Iteration - Refining the product based on
logistics and operations. feedback and test results.
 Procurement - involves acquiring the warehouse to the end consumers. This step
necessary materials and resources needed ensures that products reach their
to produce the product. This step ensures destination efficiently and cost-effectively.
that the raw materials and components are Key Aspects:
sourced efficiently and cost-effectively. Key 1. Transportation Management - Choosing
Aspects: the best methods and routes for
1. Supplier Selection - Identifying and shipping.
choosing suppliers who can provide the 2. Distribution Channels - Managing the
required materials. flow of goods through various
2. Purchase Orders - Issuing orders for distribution networks.
materials and negotiating terms. 3. Delivery Tracking - Monitoring and
3. Supplier Management - Monitoring ensuring timely delivery of products.
supplier performance and maintaining  Consumers - The final step in the supply
relationships. chain is the delivery of products to
 Suppliers - provide the raw materials or consumers. This step focuses on meeting
components required for manufacturing. customer expectations and providing a
They play a crucial role in ensuring that the satisfactory purchase experience. Key
inputs are of the required quality and Aspects:
delivered on time. Key Aspects: 1. Customer Service - Addressing customer
1. Quality Control - Ensuring materials inquiries and handling returns or
meet specified standards. complaints.
2. Delivery Management - Coordinating 2. Feedback Collection - Gathering and
timely delivery of supplies. analyzing customer feedback for
3. Supplier Evaluation - Assessing suppliers continuous improvement.
based on performance and reliability. 3. Customer Satisfaction - Ensuring that
 Manufacturing - is the process of converting products meet or exceed consumer
raw materials into finished products. This expectations.
step involves production planning, assembly, Decision Phases in Supply Chain Management
and quality control. Key Aspects:  The decision phase in Supply Chain
1. Production Planning - Scheduling and Management (SCM) is a critical aspect that
organizing the manufacturing process. determines the effectiveness of the entire
2. Assembly - Combining raw materials and supply chain. It involves making strategic,
components to create the product. tactical, and operational decisions that align
3. Quality Assurance - Monitoring and with the organization’s overall goals.
maintaining product quality throughout 1. Strategic Decisions - These are long-
production. term decisions that shape the overall
 Warehouse - Warehousing involves storing structure and operations of the supply
finished products before they are distributed chain. They typically involve significant
to consumers. Effective warehousing is investments and have long-lasting
essential for managing inventory and effects on the organization.
ensuring timely delivery. Key Aspects: a. Supply Chain Design - Deciding on
1. Inventory Management - Tracking stock the design of the supply chain,
levels and managing storage space. including the number and location of
2. Order Fulfillment - Preparing products manufacturing plants, warehouses,
for shipment based on customer orders. and distribution centers. This also
3. Storage Conditions - Ensuring proper includes decisions about suppliers
conditions to maintain product quality. and partnerships.
 Logistics - encompasses the transportation b. Product Design and Variety -
and distribution of products from the Determining the range of products
 to offer, which affects the
complexity of the supply chain.
Decisions here include
standardization versus
customization and the introduction
of new products.
c. Make or Buy Decisions - Deciding
whether to produce goods in house
or outsource to external suppliers.
This includes evaluating costs,
capabilities, and risks associated
with outsourcing.
d. Technology Adoption - Choosing the
technologies and systems to be
implemented in the supply chain,
such as enterprise resource planning
(ERP) systems, automation, and
advanced analytics tools.
Activities of Supply Chain Management
 There are three levels of activities of supply
chain management that different parts of
the company will focus on:
- Strategic (3 to 10 years)
a. Manufacturing Sites
b. Supplier Partnerships
c. Product Design
- Tactical (6 months to 1 year) 2. Push/Pull View - In this, processes in a supply
a. Purchasing Strategy chain are divided into two categories depending
b. Inventory Policies on whether they are executed in response to a
c. Transportation Cost customer order or demand (pull) or responding
- Operational (Daily/Weekly) directly to actual customer orders (push).
a. Production Scheduling Linking Competitive (Business) and Supply Chain
b. Order Fulfillment Strategies
c. Warehouse Routing - New Product Strategy - focuses on
Process View of Supply Chain developing and launching new products to
1. Cycle View - In this, processes in a supply chain meet market needs and opportunities
are divided into a series of cycles, each through innovation and R&D.
performed at the interfaces between two - Marketing Strategy - details how to promote
successive supply chain stages. and sell products, including target markets,
branding, and advertising.
- Supply Chain Strategy - manages the flow of
materials, information, and finances to
support company goals, covering
procurement, production, and logistics.
Drivers of Supply Chain
 Supply chain drivers determine the supply
chain performance. For each driver,
managers must make tradeoffs between
efficiency (cost) and responsiveness.
 1. Information - It consists of data and g. Cross-functional conflicts
results of analysis regarding inventory, h. Inconsistent or inadequate performance
transportation, facilities, customer measures
orders, customers, and funds. Good i. Resistance to change
information drives good decisions. j. Lack of training for new mindsets and
2. Sourcing - Increase revenue through skills
efficient supply chain operations and Scope of Supply Chain Activities
better customer service.  The scope of supply chain activities encompasses
3. Pricing - It influences demand, costs, and the entire process of managing and coordinating
profits, shaping how the supply chain the flow of goods, information, and finances
operates. Lower prices may need from suppliers to customers. This includes:
efficiency, while higher prices allow for 1. Sourcing and Procurement - Sourcing and
flexibility and quality. acquiring raw materials or components
4. Facilities - A facility is where inventory is 2. Production, Scheduling, and Manufacturing
stored or made. Facilities are either for - Manufacturing or assembling products
production or storage. Decisions include 3. Order Processing - Series of steps involved in
location, capacity, manufacturing, and fulfilling customer orders
warehousing methods. 4. Inventory Management – Ensuring stock
5. Inventory - It includes all raw materials, availability and managing inventory levels
work in process, and finished goods in a 5. Warehousing - It keeps items available,
supply chain. It's kept to address supply ensures accurate picking and packing, and
and demand mismatches. More directly affects order fulfillment and
inventory boosts responsiveness but customer satisfaction.
raises costs. 6. Customer Service - Handling inquiries,
6. Transportation - It involves moving issues, and returns.
inventory from one point in the supply 7. Distribution - Delivering products from
chain to another point. The six basic warehouses to customers.
modes of transportation are: air, truck 8. Reverse Logistics - Handling returns and
(road), rail, ship, pipeline, electronic recycling of products.
transportation Definition of Supply Chain Management
Barriers of Supply Chain Management  Supply chain management includes organizing
 The barriers to supply chain management and supervising every step of the sourcing and
disrupt efficiency because they create acquisition, transformation, and every aspect of
obstacles in communication, coordination, logistics administration. Crucially, coordination
and cooperation. These challenges lead to and cooperation with channel partners—who
misaligned goals, ineffective processes, and may include suppliers, middlemen, outside
increased costs, making it difficult to achieve service providers, and clients—are also included.
smooth and responsive supply chain Supply chain management essentially unifies
operations. demand and supply management both within
a. Lack of top management support and between businesses.
b. Non-aligned strategic and operating Role of Performance Measures
philosophies  The key indicators of your supply chain are
c. Inability or unwillingness to share performance metrics. They supply measurable
information information that lets you monitor productivity,
d. Lack of trust among supply chain spot obstacles, and decide wisely to streamline
members your business processes.
e. Unwillingness to share risks and rewards Qualitative vs. Quantitative Measures
f. Inflexible organizational systems and  Qualitative measures, which are frequently
processes obtained through surveys or feedback, capture
 subjective information about things like 4. Resource Utilization
employee morale and consumer satisfaction. In - This assesses how efficiently you use your
contrast, quantitative measures offer unbiased resources, including:
numerical data on variables such as time, cost, a. Manufacturing Resources - Machines,
and inventory levels, facilitating accurate Equipment, Factories
comparison and analysis. b. Storage Resources - Warehouses,
Quantitative Performance Measure: Non - Financial Distribution Centers
1. Cycle Time c. Logistics Resources - Trucks, Ships,
- Is the amount of time needed to finish a Planes
process from beginning to end. Within SCM, d. Human Resources - Employees At All
we differentiate between: Levels
a. Supply Chain Lead Time - The interval of e. Financial Resources - Capital, Cash Flow
time between receiving an order from a - Optimizing resource utilization improves
supplier and the product being delivered productivity and reduces waste.
to the client. Quantitative Performance Measures: Financial
b. Order-to-Delivery Lead Time - The 1. Cost Management
interval between an online customer's - Controlling costs is crucial for profitability.
order placement and the time it is Key cost components in SCM include:
delivered. a. Cost Of Raw Materials
- Reducing lead times provides you with a b. Revenue From Goods Sold
competitive edge and improves c. Activity-Based Costs (E.G., Production,
responsiveness. Handling)
2. Customer Service Level d. Inventory Holding Costs (Storage,
- This evaluates how well you satisfy client Insurance)
needs. It consists of: e. Transportation Costs
a. Order Fill Rate - The proportion of f. Costs Associated With Expired Goods,
orders that are filled out of stock Penalties, Returns, Etc.
b. Stock Out Rate - How frequently - Financial measures provide a clear picture of
inventory runs out your supply chain's financial performance.
c. Backorder Level - The number of orders 2. Cash Flow Management
that are not yet filled because of stock - Ensuring a healthy cash flow is essential for
shortages business survival. Key metrics include:
d. Probability Of On-Time delivery - The a. Cash-To-Cash Cycle Time - The time it
probability of completing orders by the takes to convert inventory into cash
specified deadline b. Day Sales Outstanding - The average
- Excellent customer service increases repeat time it takes to collect payment from
business and fosters loyalty. customers
3. Inventory Levels - These metrics help you manage working
- Maintaining the right inventory levels is a capital and improve financial stability
balancing act. Too much ties up capital, and Key Performance Indicators (KPIs)
too little leads to stock outs. Key inventory 1. Top – Level SCM KPIs
types include: a. Cash-to-Cash Cycle Time - Shorter is
a. Raw materials better, indicating efficient cash
b. Work-in-process conversion.
c. Finished goods b. Customer Order Cycle Time - The time
d. Spare parts from order placement to delivery;
- Inventory metrics help you identify slow- shorter lead times improve customer
moving items, excess stock, and potential satisfaction
shortages.
 c. Supply Chain Cycle Time - The total time b. In-Full Delivery - The percentage of
to fulfill a customer order, from raw orders delivered complete in the first
material sourcing to delivery. shipment.
d. Service Rate - The percentage of c. Damage-Free Delivery - The percentage
demand fulfilled from stock on hand. of orders delivered without any product
e. Perfect Order Index - Measures the damage.
percentage of orders delivered without d. Accurately Documented Order - The
any errors. percentage of orders with correct
f. Gross Margin Return on Investment paperwork and labeling.
(GMROI) - Evaluates the profitability of e. Freight Cost per Tonne Shipped -
inventory investment. Measures the efficiency of
g. Total Supply Chain Management Cost as transportation costs.
a Percentage of Sales - Tracks the overall 4. General KPIs
cost efficiency of the supply chain. a. Delivery in Full, On Time (DIFOT) -
h. Supply Chain Cost per Unit Sold - Combines on-time and in-full delivery
Measures the cost incurred for each unit into a single metric.
sold. b. Order Lead Time - The time from order
i. Day Sales Outstanding - The average placement to order fulfillment.
number of days it takes to collect c. Cycle Time - The total time to complete
payment from customers. a process, from start to finish.
2. Inventory KPIs d. Perfect Order Score - Measures the
a. Inventory Days of Supply (IDS) - How percentage of orders that are error-free
many days your current inventory will across multiple dimensions.
last based on demand? e. Cost of Goods Sold (COGS) - The direct
b. Days Sales of Inventory (DSI) - How costs of producing the goods sold by a
many days it would take to sell your company.
current inventory. f. Backorder Rate - The percentage of
c. Inventory-to-Sales Ratio (ISR) - orders that cannot be fulfilled due to
Compares inventory levels to sales stockouts.
volume. g. Forecast Accuracy - Measures how
d. Inventory Turnover Ratio (ITR) - How closely actual demand matches
many times inventory is sold and forecasted demand.
replaced in a given period. Importance of Performance Measures in SCM
e. Turn-Earn Index (TEI) - Combines  Identification of inefficiencies - Facilitated by
inventory turnover and profit margin to KPIs, which function as a flashlight, highlighting
assess inventory profitability. regions of high expenses, slow operations, or
f. Inventory Velocity (IV) - The rate at frequent errors. This enables you to focus
which inventory moves through the improvement efforts where they are most
supply chain. required.
g. Months on Hand - The number of  Enhanced Decision Making - By using data
months of inventory currently available. driven insights, you may make well-informed
h. Stock Rotations - Similar to inventory choices instead of going with your instincts.
turnover, measures how often inventory Effective resource allocation, improved supplier
is replenished. negotiations, and inventory level optimization
3. Shipping KPIs are all possible.
a. On-Time Delivery - The percentage of  Benchmarking - Evaluate your performance by
orders delivered on or before the contrasting it with competitors' or the industry's
promised date. norms to see where you stand and what areas
you may improve upon.
 Teamwork - Disseminating performance
information to partners and suppliers promotes
openness and cooperative problem-solving.
 Continuous Improvement - Monitoring KPIs
regularly lets you see your progress over time
and sets a performance benchmark. This
encourages an environment where doing better
is the constant goal and a culture of continual
progress.