STRATEGIC
SOURCINGBY: INSTR COLLEEN SIOSON
SUPPLY CHAIN MANAGEMENT IN HOSPITALITY INDUSTRY
INTRO TO SOURCING
Sourcing in procurement is defined as a process to find, evaluate, and
engage suppliers based on set criteria to achieve cost savings and best
value for goods and services at a price point & terms that give the required
margin to positively affect the company’s bottom line. The sourcing
process is carried out using a tendering process and is applied at tactical
and strategic levels with the intent to create distinctive value by finding
the most appropriate suppliers at the lowest cost to gain a competitive
advantage.
INTRO TO SOURCING
In most Hotel industry supply chains, sourcing products or
services is the first step in the supply chain process.
Sourcing involves finding a balance between the quality of
products and raw materials required and affordability.
The goal for most procurement teams is to spend less and
increase the bottom line.
WHAT IS SOURCING?
Typically, sourcing is finding the most suitable supplier that provides
the quality of goods or services at a price point that gives the business
owner the profit margins they need. Sourcing and procurement
management fit together like hand and glove. But before you can
procure goods, it is essential to:
Find prospective suppliers
Implement a rigid vetting process
THREE FACTORS ARE CENTRAL TO THE SOURCING
PROCESS, AND THESE ARE:
COST STRUCTURE PROFIT MARGINS COMPETITIVENESS
All three factors affect businesses of all sizes.
The sourcing process involves:
Collecting data on good quality sources of goods and services
Negotiating contracts
Market research
Product testing for quality
Considering outsourcing for goods
Constituting standards that the company will use.
You must keep in mind that the end goal of sourcing is procurement. Steps in the
procurement process include:
Logistics
Communications
Negotiations
DIFFERENT TYPES OF SOURCING
To implement successful sourcing, you must have a thorough understanding of
your entire business services strategy. especially in the hotel industry, you need to
know what resources are required to deliver that strategy and the market forces
and specific risks associated with implementing particular approaches.
Acquiring cheap goods and services should not be the only goal of sourcing.
Instead, procurement teams should center sourcing activities around developing
mutually beneficial relationships. Depending on your sourcing needs and the
goods you are trying to acquire, you can choose to work directly with wholesalers,
manufacturers, or sources from distributors.
That said, what types of sourcing should you consider?
DIFFERENT TYPES OF SOURCING
01 OUTSOURCING
08 PROFESSIONAL SERVICE
02 INSOURCING
09 MANUFACTURING
03 NEAR-SOURCING
10 VERTICAL INTEGRATION
04 LOW COST COUNTRY SOURCING
11 FEW OR MANY SUPPLIERS
05 GLOBAL SOURCING
12 JOINT VENTURES
PRIME/SUBCONTRACTING
06 ARRANGEMENTS 13 VIRTUAL ENTERPRISE
07 CAPTIVE SERVICE OPERATIONS
1. Outsourcing
This can also be done by migrating operations abroad or partnering with a domestic
supplier. Both back and front office functions can be outsourced.
2. Insourcing
This type of sourcing involves you delegating a job to someone or a team within
the company. Most company leaders prefer this option when available because it
is an excellent cost-saving strategy that allows for on-the-ground monitoring of the
quality of goods and services required.
3. Near-sourcing
This involves placing some of your operations close to where your end-products are
sold.
4. Low-cost Country Sourcing (LCCS)
LCCS involves sourcing materials from countries with lower labor and production
costs. This type of sourcing focuses on cutting down the overall operating expenses
of an organization.
5. Global Sourcing
Buying goods and services from international markets across geopolitical boundaries has become
an easy process. This method has many benefits and exposes your organization to different
markets; moreover, you gain insight into how business is conducted worldwide.
6. Prime/Subcontracting Arrangements
This arrangement involves a contract between a contractor and a subcontractor to perform a
portion of work that is part of a larger project. All contracts are dealt under offshore law because the
agreement is between two offshore entities. Procurement teams can reduce the burden of dealing
with import or export restrictions
7. Captive Service Operations
Some organizations go as far as establishing and operating some form of a partly/ wholly-owned
entity overseas. This method makes room for greater control and allows you to control
confidentiality and security issues. However, your economies of scale will be negatively affected.
8. Professional Service
You can recruit the professional services of occupations in the service sector requiring special
training.
9. Manufacturing
The creation of new products either from raw materials or components.
10. Vertical Integration
Involves the merging of companies at different production and/or distribution stages in the same
industry. So, when a company acquires its input supplier, it is called backward integration; it is
called forward integration when it acquires companies in its distribution chain.
11. Few or many Suppliers
A multi-supplier strategy is commonly used for commodity products, and purchasing is typically
based on price. On the other hand, 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.
12. Joint Ventures
This is a business entity created by two or more parties. It is generally characterized by shared
ownership, returns and risks, and governance.
13. Virtual Enterprise
This is when a network of independent companies (i.e., suppliers, customers, competitors) are
linked by information technology to share skills, costs, and access to one another’s markets.
WHY IS SOURCING IMPORTANT?
The first step in getting the supply chain right is sourcing the products and
services.
There is also a need to balance the quality of the products and the raw materials
that one needs.
Moreover, affordability of the products is also an aspect that needs to be
considered where sourcing is concerned, as it directly impacts the bottom line.
Strategic sourcing also helps in cost management by providing benefits for both
the buyers and the suppliers.
Negotiating lower unit pricing for high volume purchasing reduces the cost of
goods. It allows the business to keep its pricing competitive.
SUPPLY CHAIN IMANAGEMENT IN HOSPITALITY INDUSTRY
BENEFITS OF SOURCING
1. Cost-Saving
The first and most popular benefit of strategic sourcing is the amount of money that
organizations can save by selecting and choosing suppliers that will offer the highest value at the
best price possible. This will have a domino effect and positively affect your bottom line.
2. The honing of ideal suppliers
Effective implementation of a sourcing process has its foundation on the quality of the suppliers
involved. This allows you to match your organization’s objectives with your ideal supplier
resulting in the highest value creation at the lowest possible cost.
3. The establishment of a long-term relationship with suppliers
When suppliers are valued and considered in various sourcing decisions, they will feel motivated
and optimize their performance to meet your organization’s objectives.
PROCUREMENT VS. SOURCING:
WHAT'S THE DIFFERENCE?
Procurement involves multiple processes and
numerous steps such as:
Needs recognition
Requesting goods and services
Review and approval
Sourcing
Purchase order
Receipt of goods or services
Receipt of invoice
Pay invoice
Sourcing involves:
Defining the need
Researching the market
Running sourcing events
Vetting suppliers
GROUP ACTIVITY
Assume that you are the members of using
procurement and sourcing, Think of a product or
services and apply the different types of Sourcing.
WHEN TO SUBMIT? NEXT MONDAY
WHAT TO SUBMIT? PDF AND POWERPOINT
WHERE TO SUBMIT?
Eastfaculty.colleensioson@gmail.com
-----SUBJECT: GROUP 1_GROUP ACTIVITY #_SCM------
