Supply Chain Management in Hospitality PDF

Supply Chain Management  SCM Introduction O Operating successfully requires organizations to become much more involved with their suppliers and customers. As global market expand and competition increases, making products and services that customers want means that business must pay...

Supply Chain Management  SCM Introduction O Operating successfully requires organizations to become much more involved with their suppliers and customers. As global market expand and competition increases, making products and services that customers want means that business must pay closer attention to where materials come from, how their supplier’s products and services are designed, produced, transported, how their own products and services are produced and distributed to customers, and what their direct customers and the end-product consumer really want.  SCM Introduction O Management of the SC tends to lead to a company’s financial performance. O Integrated behavior, reciprocal knowledge exchange, mutually managed risk and benefits, cooperation, customer service, integration processes, and stakeholders are important aspects of SCM to establish and sustain long-term relationships. It is meant to maximize differentiation, boost profits, and enter new markets for leading businesses utilizing the SC. The aim is to promote competitive advantage and stakeholder value.  SCM Introduction O In the hospitality sector, SCM is somewhat different form other sectors. Capitol costs for industries are high and operational costs are relatively low. For the hospitality industry, customer loyalty is paramount. This adversely impacts the management of the SC. The various control systems have different effects on the management of the supply chain. In most properties, interconnections between office processes directly impact are related to the purchasing process. In other words, all the efforts are customer-driven, which ensure that much cost savings can be accomplished by strengthening upstream control of the SC. O Room material prices, sourcing materials, product manipulation, and emergency acquisitions are different problems in the hospitality sector in the field of the SC. O Communication and information exchange through computer networks using enterprise resource planning (ERP) systems and the Internet have made global teamwork not only possible but necessary for firms to compete in most markets. Communication technology continues to change rapidly, making global partnerships and teamwork much easier than ever before. Competition is rapidly in all industries and in all markets around the world, bringing new materials, products, people and resources together, making it more difficult for the local, individually owned, “mom- and-pop” shops to keep customers. O Purchasing, operations, logistics and transportation must not only be equipped with the necessary expertise in these critical supply chain functions but also must appreciate and understand how these functions interact and affect the entire supply chain. What is Supply Chain? O System of organizations, people, activities, information and resources involved in making a product or service from supplier to customer. O An integrated group of processes to “source”, “make”, and “deliver” products. O Activities transform raw materials and components into a finished product that is delivered to the end customer. What is Supply Chain? O Managing of flow of goods and services that starts from the origin and ends at the consumption of the product. O Involves the movement and storing of raw materials, inventory, and professionally equipped materials. O The principal purpose of SCM is to track and link the product and service production, delivery, and shipping. O Companies that possess very strong stocks, manufacturing, distribution, internal manufacture, and sales will do this. What is Supply Chain? O Process of planning, implementing and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. O It manages all movement and storage of raw materials, work-in- process inventory, and finished goods from point-of-origin to point- of-consumption.  SCM Importance O The importance of SCM with value-enhancing benefits as: O 1) can lower purchasing and inventory carrying costs. O 2) better product quality. O 3) higher levels of customer service – all leading to more sales. O 4) reduced cost and improved revenues. O 5) firms hire knowledgeable in SCM activities help the firm develop its own capabilities, and get the benefits much faster. O 6) develop internal skills in managing supply chains. O 7) built important suppliers, key customers and logistics services. O 8) SCM efforts can include second-tier suppliers and customers  Benefits of SCM O 1) Builds stronger relationships and support with clients. O 2) Provide better distribution processes, with less delay, for demanded goods and services. O 3) Increases efficiency and functions for companies. O 4) Lower shipping and warehouse costs. O 5) Eliminates costs directly and implicitly. O 6) Supports the shipping at the right spot with the right goods. O 7) Enhances asset management and encourages the effective implementation of just-in-time inventory models. Supply Chain Flow KEY SCM Concepts O Total Quality Management (TQM)  Quality Service  Customer Satisfaction  JIT – Just In Time  Plan, Do, Check, Act  Accreditation/ISO  Customer Relationship Management SUPPLY CHAIN GOALS O Efficient Supply Chain Management must result in tangible business improvements. It is characterized by a sharp focus on:  Revenue growth  Better asset utilization  Cost reduction  Different from Logistic Management O Logistic management can be termed as one of its parts that is related to planning, implementing, and controlling the movement and storage of goods, services and related information between the point of origin and the point of consumption. But Supply Chain Management includes more aspects apart from the logistic function. Opportunities enabled by SCM O Proper implementation of SCM helps to use the following strategic areas to their full advantage: O FULFILLMENT O Ensures the right quantity at the right time. O It makes sure that the right quantities are ordered. O LOGISTICS O Keep the cost of transporting materials as low as possible consistent with safe and reliable delivery. O Constant contact with its distribution team O PRODUCTION O Ensure production lines function smoothly. O REDUCED COST O Inventory carrying cost O Internal and External Failure Cost O REVENUE and PROFIT O No sales are lost and flexible to respond unforeseen changes. Implementation: Points to keep in mind O Recognize the difficulty of change. O Prepare a blueprint for change that maps linkages among initiatives. O Assess the entire supply chain from supplier relationships to internal operations to the marketplace, including customers, competitors, and industry as a whole. SUPPLY CHAIN LEVELS/ FUNCTIONS OF SCM O STRATEGIC O Strategic network optimization involving warehouse, facilities locations and scale O Strategic relationships, contract networks and technological enhancements such as cross-docking, exporting directly or logistics with 3rd parties (with vendors, dealers, and consumers) O Management of inventory life cycles to optimally combine new and current goods in supply chain and capacity management O Chain operations for information technology O Coordination of the whole corporate plan with the strategy of supply O TACTICAL O Sourcing and other procurement decisions O Decisions on production including the concepts of contracts, schedules, and plans for the operation O Purchasing choices including inventory size, location and consistency O The strategy of transport including pace, routes, and contracting O Competition benchmarking of all processes including best practices around the business O Fees with milestones O Customer demand and customer habit focus.  SUPPLY CHAIN LEVELS/ FUNCTIONS OF SCM O OPERATIONAL O The coordination of the allocation of daily output for each production plant in the supply chain (minute by minute) O Preparation and forecasting of demand, alignment of all customer’s needs, and prediction-and-provision-sharing will all suppliers. O In coordination with all vendors, supply preparation, including existing inventories and forecast demands. O Inbound activities including retailer transport and shipment receipt. O Production processes involving materials use and finished products streaming O Outbound operations, all tasks including customer efficiency, warehousing, and transport. O Pledging orders for all retailers, production, fulfillment center, and other clients on all restrictions within the supply chain. O All cases of transit disruption form manufacturing level to supply level, and plan for consumer payment through retention of business loses by the insurance provider. SUPPLY CHAIN LEVELS/ FUNCTIONS OF SCM O STRATEGIC O Supply Chain Design O Resource Acquisition O Long Term Planning (1 year ++) O TACTICAL O Production/Distribution Planning O Resource Allocation O Medium Term Planning (Quarterly, Monthly) O OPERATIONAL O Production Scheduling O Resource Scheduling O Performance Tracking O Short Term Planning (Weekly, daily) PROBLEMS FACED by the SCM ISSUE DETAILS O Distribution Network Configuration Number and location of suppliers, production facilities, distribution center, warehouses and customers O Distribution Strategy Centralized versus decentralized, direct shipment, pull or push strategy O Information Integrate System and processes though the supply chain to share valuable information, including demand signals, forecast. O Inventory Management Quantity and location of inventory including raw materials, work in process and finished goods. SUPPLY CHAIN OPERATIONS: PLANNING AND SOURCING O The SC consists of series of steps a business takes to make raw materials a finished product. O With the diverse needs and wants of the customers in the hospitality industry, the SC operations change and align with the fast-paced requirements of the industry to plan, source, make, and deliver. SC Operations: Plan and Source O 1. Plan O A. Forecast – estimate O A.1 Supply – total demand of goods on the market O A.2 Demand – amount of product available O A.3 Product Characteristics – product features that influence demand O A.4 Competitive Environment – actions of product suppliers in the market O FORECASTING METHODS O 1. qualitative intuitions or beliefs O 2. Causal – many conditions in connection with demand O 3. Time Series – based on trends of traditional demand O 4. Simulation – combines cause and time procedures SC Operations: Plan and Source O B. Aggregate Planning – satisfy the demand for the commodity, as demand prediction is established. O C. Product Pricing Planning O D. Inventory Management Plan O D.1 Cycle Inventory – interval ordering for the product O D.2 Safety Inventory – potential demand O D.3 Seasonal Inventory – season products SC Operations: Plan and Source O 2. Source O 2.1 Procurement – acquisition procedure to obtain the required products and services (large function) O 5 Procurement Activities O 1. Purchasing – regular ordering items O 2. Consumption Mngt – recognize the number of goods. (purchase by where and what cost) O 2.2 Vendor Selection – product quality, service standards, fair-in-time distribution, technical support can be calculated. O 2.3 Contract Negotiation – pricing and standard of service are created. O 2.4 Contract Management – monitor the supplier’s output and responsible for meeting the quality of service negotiated in its contracts. O 3. Credit and Collections – obtaining funds a business needs. Minimize cash claims/ strong credit ratings and invoice payments are possible 3 C&C Activities. O 1. Set credit policy O 2. Implement C&C Processes O 3. Manage Credit Risk O 3. Make O 4. Deliver Bullwhip Effect  BULLWHIP EFFECT O (another term Whipwash Effect) is an observed phenomenon in forecast-driven distribution channels. O Because customer demand is rarely perfectly stable, businesses must forecast demand in order to properly position inventory and other resources. O Forecast are based on rarely perfectly accurate statistics.  Factors Contributing Bullwhip Effect O Forecast errors O Lead time variability O Batch ordering O Price Fluctuations O Product Promotions O Inflated Orders O Methods Intended to reduce uncertainty, variability, and lead time i.e. JIT (Just in Time), replenishment and Strategic partnership. Bullwhip Causes and Reduce the Effect Inventory: Bullwhip Effect  PROCUREMENT O Procurement refers to techniques, structured methods, and means used to streamline an organization’s procurement process and achieve desired results while saving cost, reducing time, and building win-win supplier relationships. Procurement can be direct, indirect, reactive, or proactive in nature. O issflow.com/procurement/procurement-process/ Types of Procurement Direct Indirect Services Procurement Procurement Procurement Acquisition of Sourcing and Procuring and goods, purchasing managing materials, materials, contingent and/or services goods, or workforce and manufacturing services for consulting purposes internal use services Ex: Raw Ex: Utilities, Ex: Professional materials, facility services, machinery, and management, software resale items and travel subscriptions, etc. Drives external Takes care of Used to plug profit and day-to-day process and continuous operations people gaps growth in revenue Comprises of Used to buy Used to stock materials consumables purchase or parts for and perishables external production services and staff Establish long- Resort to short- Maintain one-off, term, term, contractual https://kissflow.com/procurement/procurement-process/ collaborative transactional relationships supplier relationship with with suppliers relationships suppliers  Purchasing vs O Procurement While purchasing is the overarching process of obtaining necessary goods and services on behalf of an organization, procurement describes the activities involved in obtaining them. The procurement process in an organization is unique to its context and operations. O Regardless of the uniqueness, every procurement management process consists of 3 Ps’, namely Process, People, and Paperwork. Procurement vs Purchasing PROCUREMENT  Module 3: Manufacturing and Information Technology Framework O Manufacturing is the activity consisting in to make a good with tools and/or machines by effecting chemical, mechanical, or physical transformation of materials, substances, or components, or by simulating natural processes, usually repeatedly and on a large scale with a division of labor. O Due to the economic and strategic importance of knowing in advance the client’s needs to develop the master production planning, a mathematical model to link the activities of the supply chain with the development of the master plan of production using a mixed integer linear programming model with a stochastic approach. It includes a set of constrains that represents the real necessities of the customers in markets of high density. Importance of Supply Chain and Manufacturing Systems O 1. Optimal production planning and scheduling. O 2. Ensures efficient production, reliable delivery, and lower costs. O 3. It develops corporate vision that optimizes operational excellence, provides insightful analytics, deploys and measures strategic initiatives, and identifies and manages risks.  Module 3: Manufacturing and Information Technology Framework O Information Technology Framework O In age of paper-based transaction and communication, the information flow in supply chain networks was time consuming and error prone. O Due to globalization, organizations had started the changing the way of communication, implementation of technology, growing diversity of business transactions and process improvement for sharpening the business performance through IT applications in their Supply Chain Networks.  Module 3: Manufacturing and Information Technology Framework O The exponential growth of Information Technology (IT) with communication technology in Supply Chain Management (SCM) is playing critical role in optimizing decisions of the supply chain network flow for achieving organizational competitiveness, improving higher service level, lowering inventory, supply chain costs and reducing electronic risks (e-risks). O To achieve integration and effective information sharing across and beyond the organizations, IT in SCM is also required. The organizations are moving towards the virtual supply chain with help of rapid changes in technology and IT applications viz; Electronic Data Exchange (EDI), Radio Frequency Identification (RFID), Bar Code, Electronic Commerce, Decision Support system, Enterprises Resource Planning (ERP) package, etc. It is also easily applicable in curbing the e-risks. Understanding the role and application of IT in managing and curbing e-risks of Supply Chain is the basic theme of this paper. CUSTOMER MANAGEMENT RELATIONSHIP (CRM) KINDS OF INNOVATION