Cebu Eastern College

College of Hospitality & Tourism Management

FLEXIBLE LEARNING MODULE

Course Title SUPPLY CHAIN MANAGEMENT

Course Code HMPC5
Course Unit (s) 3
Pre-Requisite None
Semester & A.Y. Second Semester A.Y. 2022-2023
Learning Approach Synchronous & Asynchronous On-line

Learning Outcomes
 Describe what supply chain is and what it does in the hospitality industry.
 Discuss the features, benefits, and functions of supply chain management;
 Identify the factors affecting the supply chain in the hospitality industry;
 Enumerate the challenges of the hospitality industry related to the supply chain.

LESSON 1

Overview of Supply Chain

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 are
considered operations management techniques in the hotel and other service sectors, they may assist in
adding value to their properties.

The hospitality business is a broad group of industries within the service sector encompassing hotels,
restaurants, event organizing, 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.

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 a supply chain 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 installations 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 or services.

 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

Integrated Behavior Supply Chain Management (SCM) integrates stakeholder

integration between the client and the provider.
Mutually Sharing Information In particular for planning and surveillance processes, an
efficient SCM exchange of information between channel
participants is needed.
Mutually Sharing Channel Risk and Effective SCM often includes reciprocal channel risks and
Rewards incentives to have a competitive benefits. The long-term
emphasis and coordination between supply chain
participants should be risk-sharing and rewards-sharing.
Cooperation The successful SCM Requires cooperation between the
channel participants. Cooperation refers to the company’s
coordinated, identical, or complementary operations in an
enterprising relationship, in order to achieve collectively
reckoned, superior results.
Focus on serving customers Supply chain is effective where all supply chain members
serve consumers with the same objective and concentration.
A mode of policy convergence has the same aim and focal
point for supply chain members.
Integration Processes Implementing SCM requires the convergence of systems
from the supply chain to production and delivery. Integration
can be achieved under cross-functional conditions, by staff of
plant suppliers and services by third parties.
Partners to Build and Maintain Long The objective of successful Partnerships is to merge channel
Term Relationship 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

1. Builds stronger partnerships and support with clients

2. Provides better distribution processes, with less delay, for demanded goods and services

3. Increases efficiency and functions for companies

4. Lowers shipping and warehouse costs

5. Eliminates costs directly and implicitly

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. Assists 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

Functions of Supply Chain Management

1. 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)

 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

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

 Fees with milestones

 Customer demand and customer habits focus

3. Operational Level

 The coordination of the allocation of daily output for each production plant in the supply chain
(minute by minute)

 Preparation and forecasting of demand, alignment of all customers' 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

 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 disruption from manufacturing level to supply level, and plan for consumer
payment through retention of business losses by the insurance provider

Factors Affecting Supply Chain in Hospitality Industry

1. 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. This has a detrimental impact on
supply chain management. Customer- related activities including food and beverage production and
service, housekeeping, and front office administration are critical in the hotel industry. Accounts, buying,
supply chain management, and revenue records are pushed to the sidelines.

2. Management systems of different types, such as hotel operators, franchisees, chain hotels, and so on,
are various control systems that have varied implications on the supply chain management. These
factors add to the specific difficulties with assets that are often disputed and handled differently.
3.Current market trends indicate that computerized property management systems are utilized but
solely for front office administration and reservation. Interconnections across office operations, whether
in the hotel front office, back office, or buying process, are rare in most hotels. In other words, all
activities are customer-driven, ensuring that significant cost savings may be realized by improving
upstream supplychain management. As a result of the above, some problems unique to the hotel sector
may emerge.

Challenges of Hospitality Industry Related to Supply Chain

1. Raw Material Costs. The cost of purchasing raw materials in the hotel industry is prohibitive. The vast
majority of the hotel's consumables are organic. A hote store handles massive amounts of goods at
meager prices. Much of the direc cost of material is spent on these items. Because of the perishable
nature, a bul purchase cannot be utilized-the number of transactions-and therefore, the cos of
transactions, increases. The concept of mechanization or automation canno be wholly applied due to
the many different products bought by a wide range suppliers across several agencies. Standardization is
not possible in such situation As a consequence, transaction costs increase.

2. Material Ordering Costs. Individual agencies often utilize handwritten indents and transactions
independently. Several hotels do not have automated entry and sales requests Consolidating these
indents and takes a long time. Because restructuring is complex, the purchasing department places
several orders for the same products. Except for chain businesses with many units in the same area,
hotels do not take advantage of bulk purchases in the exact location. Hotels are known to purchase an
excessive number of units of various labels and packaging sizes. This has a negative impact on
restructuring, increased supply, and increased cost. Hotels owned by the same business may purchase
the same products from same vendors at different rates. The costs of transportation and other
associated expenditures have also been reduced substantially. Supply chain management may result in
significant cost reductions.

3. Inventory Handling. The required product forecast is very uncertain. It turns into a paper tiger even
after it is done. The purchasing department stockpiles large quantities of goods and does not deliver the
best items to the user departments on time. This is a common problem that leads to higher expenses.

4.Emergency Purchases. Due to lack of preparation, emergency purchases are the norm rather than the
exception, Purchases are made on the spur of the moment at the request of user departments and are
subsequently formalized by completing the necessary paperwork.

Chapter Summary
Supply chain management can be described as managing the flow of goods and 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 purpose of supply chain
management is to track and link the product and service production, delivery, and shipping. Companies
that possess very strong stocks, manufacturing, distribution, internal manufacture, and sales will do this.

Management of the supply chain tends to lead 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.

The strategic level, tactical level, and operational level are the three major roles of supply chain
management.

In the hospitality sector, supply chain management is somewhat different from other sectors, Capital
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 supply chain. The various
control systems have different effects on the management of the supply chain. In most properties,
interconnections between office processes directly impact and 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 supply chain.

Room material prices, sourcing materials, product manipulation, and emergency acquisitions are
different problems in the hospitality sector in the field of the supply chain.
LESSON 2

Supply Chain Operations: Plan and Source

By routine or continuous processes, a supply chain carries out the job. These are the processes at the
center of every supply chain called "nuts and pins." 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 SOURCE
-Order -Procurement
Management -Credit and
-Delivery Collections
Scheduling
-Process Returns

MAKE
-Product Design
-Production
scheduling
-Facility
Management

PLAN: Categories of Supply Chain Operations

The preparation phase is the beginning of the supply chain operation. We need to build a road map or
approach to deal with how goods and services meet consumers' 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.

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.

A. Forecasting

Decisions of the supply chain management are dependent upon estimates defining which goods are
required, what quantity, and when these products are required. The demand prediction is the
foundation of any business toward proper planning to satisfy consumer demand. Both predictions are
made up of four primary factors to assess the market conditions. They are the following variables:

1.Supply. This refers to the total demand for goods on the market.

2.Demand. This refers to the amount of product available.

3.Product Characteristics. This refers to the product features that influence demand

4.Competitive Environment. This refers to the actions of product suppliers in the market.

Forecasting Methods in Supply Chain

When making predictions, there are four simple approaches to use. The bulk of projections are made
using variations of the four processes. Listed below are the methods:

1.Qualitative. It is founded on an individual's intuition or beliefs.

2.Causal. It assumes that there are many conditions in connection with demand.

3.Simulation. It combines cause and time series procedures.

4. Time Series. It is based on trends of traditional demand

 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:

1. Use production capacity to meet demand

Align production capacity to satisfy demand by adding/removing production capacity to use 100% of its
capacity.

2. Use varying levels of total production capacity

As appropriate, intend to retain increased production capacity as requi to satisfy projected demand.

3.Use inventory and work-in-progress inventory

Develop new inventories to support the projected potential demand to meet demand.

C. Product Pricing Planning

The use of prices can affect demand over time in businesses and whole supply chains. It tends to
increase sales or gross profit depending on how the premium is used. Marketing and salespeople
typically want to make price choices to boost demand in the peak seasons. The goal is to increase overall
profits. Mostly, financial people or manufacturers choose to decide prices that boost demand during low
times. Their objective is to increase gross profit during times of peak demand and produce revenues to
offset expenses in periods of low demand.

It is 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 cannot shift
rapidly between workforce and capability staff and performance easily
D. Inventory Management Plan

Inventory management is a group of strategies that are used to control inventory levels in various supply
chain organizations. The objective is to decrease inventory costs while preserving the quality levels
desired by consumers. Inventory control takes the primary feedback commodity demand estimates and
product costs. Inventory management is a continuous process for all of these inputs to balance
commodity inventory levels to respond to demand and leverage economies of scale to obtain the
product prices. The stock storage of a firm or a whole supply chain consists of a combination of
operations for the management of three separate inventory categories.

Three Kinds of Inventory Plan

1. Cycle Inventory. The inventory is necessary for fulfilling commodity requirements during the interval
between ordering for the product.

2.Safety Inventory. This happens when, in expectation of potential demand, an organization or supply
chain with a certain profitable capability plans to manufacture and store goods.

3.Seasonal Inventory. The volatility in a supply chain must be compensated. In general, the greater the
degree of uncertainties, the higher the degree of protection required.

SOURCE: Categories of Supply Chain Operations

The next phase is creation or procurement after planning. At this point, we concentrate primarily on
maintaining a close partnership with suppliers of essential raw materials. This includes not only the
identification of reliable suppliers, but also the determination of various ways of arranging for shipping,
supply, and payment. Companies must choose vendors to supply their merchandise products and
services. In this phase, supply chain managers must then build with their vendors a collection of pricing,
supply, and payments systems and, therefore, develop the methods to maintain the partnerships and
improve them. Finally, all these procedures for managing their inventory of products and services can be
integrated by chain administrators. This process involves the receipt and examination of orders, the
transition to production facilities, and the authorization for payments from the supplier.

Operations in this group provide the required operations to gain feedback for the production of goods
or services. We are looking at two activities here. First is sourcing, which is the goods and resources
purchase. The second choice, credit and collections, are historically not regarded as a procurement
practice but can simply be considered the of currency. All these activities have a major effect on supply
chain performance.
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. This makes the procurement activity now seen to be
part of a larger function called procurement. Procurement is the acquisition procedure used by an
organization to obtain the required products and services.

Five Procurement Activities

1.Purchasing

The regular operations related to ordering items for the required products are these tasks. A business
buys two categories of goods: (1) direct or strategic materials used to manufacture the products it
provides to its clients, and (2) Indirect and maintenance, repair, and service (MRO) supplies used by the
company in everyday operations.

2. Consumption Management

Effective sourcing starts by recognizing the number of goods being acquired in each business unit and
the whole enterprise. It must be understood how many items are purchased by where and at what cost.

3. Vendor Selection

In addition to merely the price of a component of a retailer, the importance of these capacities must be
considered. Just based on the strategic strategy and the operational model of the organization, the
importance of product quality, service standards, fair-in-time distribution, and technical support can be
calculated.

4. Contract Negotiation
This is where the individual goods, pricing, and standards of service are created. Contracts to procure
indirect goods are easiest negotiated where vendors are chosen at the lowest price. The most
complicated agreements include arrangements for the procurement of direct facilities that follow high-
quality expectations that require a high degree of operation and technological assistance.

5. Contract Management

An organization has the opportunity to monitor its suppliers' output and keep them responsible for
meeting the quality of service negotiated in its contracts. Similarly, individuals in an enterprise need to
gather information regularly about suppliers' results. Any provider regularly falling behind standards
should be informed of and asked to remedy the deficiencies.

B. Credit and Collections

Credit and collections are the means of obtaining the funds a business needs. The credit operation
checks prospective clients to ensure that the firm is only dealing with customers that can afford their
bills. The running of the collections gives the money the business has won.

Good handling of credit attempts to meet customers' product requirements and, thus, minimizes cash
on claims. This is similar to those of good stock management, the demand of customers is met and the
amount of money attached to stock reductions is minimized.

The supply chains in which an enterprise is involved are also chosen by credit decisions. Most of the
confidence and collaboration between businesses dependent on strong credit ratings and prompt
invoice payments are possible. The decisions on lending influence the individual and the terms of sale of
a business.

Three Credit and Collections Activities

1. Set Credit Policy

Senior management such as the auditor, the chief financial officer, the treasurer, and the chief executive
officer develop credit policies. The first phase is an analysis of the company's debts' results. The
following move would be to set or adjust the conditions for approval of risks to satisfy the status of
business claims.
2. Implement Credit and Collection Processes

These operations include the implementation and operation of protocols to implement and implement
the company's credit policy. Collect payments for the goods sold by the corporation through salespeople
and clients.

3. Manage Credit Risk

This checks for opportunities to reduce the cost to potential buyers to sellers. Create credit systems and
finance programs that meet consumer requirements. Analyze and review customer credit rating over
time.

Chapter Summary

The control of the supply chain is a mechanism used by businesses to maintain a reliable economic
supply chain. Supply chains are efforts taken by a corporation to transform raw products into finished
products.

The company's supply chain activities can be divided into four main categories: (1) the plan; (2) the
source (3) the make; and (4) the delivery. These classes consist of company processes that decide the
daily activities of the supply chain. In these fields, businesses need to make ongoing changes.

The plan category shall contain all the operations needed in the other three divisions to plan and
coordinate operations. The activities in this area are forecasting, aggregate planning, pricing, and stock
management.

The source category requires the actions needed to procure the goods or services inputs. We are looking
at two activities here. First is the sourcing, which is the goods and resources purchase. The second
choice is credit and collections, which are historically not regarded as a procurement practice but can
simply be considered the purchase of currency. All these activities have a major effect on supply chain
performance.