Republic of the Philippines

IM – HPC 7 – SECOND SEM. 20 – 21

NUEVA VIZCAYA STATE UNIVERSITY Bayombong,
Nueva Vizcaya

INSTRUCTIONAL MODULE

COLLEGE OF HUMAN
ECOLOGY
Bayombong Campus

DEGREE PROGRAM BSHM COURSE NO. HPC 7

SPECIALIZATION COURSE TITLE Supply Chain Management in the
Hospitality Industry
YEAR LEVEL 2nd Year TIME FRAME 3 hrs WK NO. 4-5 IM NO. 03

I. CHAPTER TITLE MODULE - III

THE SUPPLY CHAIN MANAGEMENT PROCESS

II. LESSON TITLE

• How does supply chain management work?

• The components of supply chain management
• Supplier development
• The product development within hospitality environments
• Returns management Consumables in hospitality
• Implement supply chain management in hotel industry

III. LESSON OVERVIEW

Supply chain management defined as the design, planning, execution, control and
monitoring of supply chain activities with the objective of creating net value, building
a competitive infrastructure, leveraging worldwide logistics, synchronizing supply
demand and measuring performance globally.

The module provides students’ awareness on the supply chain management

processes in the hospitality industry.

IV. DESIRED LEARNING OUTCOMES

At the end of this chapter, the students are expected to:

• Understand how does supply chain management work
• Explain and discuss the components of supply chain management
• Understand supplier development
• Explain the product development within hospitality environments
• Explain returns management
• Discuss the implementation of supply chain management in hotel industry.

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educational purposes only and not for commercial distribution,”

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 Republic of the Philippines
IM – HPC 7 – SECOND SEM. 20 – 21
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INSTRUCTIONAL MODULE
V. LESSON CONTENT

A. HOW DOES SUPPLY CHAIN

MANAGEMENT WORK?

How does supply chain management

work?

Supply chain management operates by managing procurement, suppliers,

manufacturing facilities, dealers, distributors and consumers as they step forward
through the production, sales and purchasing processes. The supply chain needs
active management because many variables beyond the reach of the firm, such
as gas prices and environmental situations, influence it. When a company is
acutely aware of those factors, it can manage through them more effectively.
With effective SCM, inventory, production, distribution, sales and vendor
inventory are all tightly controlled.

Supply Chain Management refers to managing costs at every step and

delivering goods to consumers as quickly as possible. It assumes that every
product that is for sale exists because of the various participants in the supply
chain. A supply chain manager is a trained professional responsible for five
essential components of the chain:
• The carefully researched and developed strategy of the supply chain.
• The source of the materials used to make the goods to sell.
• The efficient production of the manufacturing process in getting the goods
ready for the market.
• The delivery mechanisms and logistics that move the products to the
consumers and distributors
• The system for managing the return of defective or unwanted products.
• The manager works to prevent shortages and reduce costs through these five
elements, which has a direct impact on profits.

THE COMPONENTS OF SUPPLY CHAIN MANAGEMENT

https//www.tutorialspoint.com/supply chain_management/images/scm_process.jpg

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 Republic of the Philippines
IM – HPC 7 – SECOND SEM. 20 – 21
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INSTRUCTIONAL MODULE

1. Plan

The initial stage of the supply chain process is the planning stage. Wen
develop a plan or strategy in order to address how the products and services will
sati the demands and necessities of the customers. In this stage, the planning
should mainly focus on designing a strategy that yields maximum profit.

For managing all the resources required for designing products and
providing services, a strategy has to be designed by the companies. Supply
chain management mainly focuses on planning and developing a set of metrics.

2. Develop (Source)

After planning, the next step involves developing or sourcing. In this

stage, we mainly concentrate on building a strong relationship with suppliers
of the raw materials required for production. This involves not only identifying
dependable suppliers but also determining different planning methods for
shipping, delivery, and payment of the product.

Companies need to select suppliers to deliver the items and services

they require to develop their product. In this stage, the supply chain managers
need to construct a set of pricing, delivery and payment processes with
suppliers and also create the metrics for controlling and improving the
relationships.

Finally, the supply chain managers can combine all these processes
for handling their goods and services inventory. This handling comprises
receiving and examining shipments, transferring them to the manufacturing
facilities and authorizing supplier payments.

Supplier Development

Supplier Identification: Generally, supplier base is huge in the hotel

industry, this has its positives, conscious steps should be taken to identify
committed suppliers who are willing to go by the objectives of the
organization, and be involved and appreciate and support the changes of the
organizational requirements.

Supplier evaluation and selection: Supplier evaluation is a critical

process supplier's ability to supply the right goods at the right time with
correct specifications has to be reviewed. Contracts are awarded after careful
negotiations with the supplier.

Supplier management: After the suppliers fulfills its obligation by

delivering the required goods as per specifications it's the responsibility of the
Purchase department to ensure suppliers bills are paid promptly, at times
good suppliers are lost due to the payment delays. Therefore, its very
essential to maintain a strong relationship with the supplier hence supplier
management has to be strengthened.

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 Republic of the Philippines
IM – HPC 7 – SECOND SEM. 20 – 21
NUEVA VIZCAYA STATE UNIVERSITY Bayombong,
Nueva Vizcaya

INSTRUCTIONAL MODULE

Supplier development and improvement: It's a very crucial step in

the supplier chain management. A careful consideration of this process would
contribute towards efficiency and cost saving.

3. MAKE

The third step in the supply chain management process is the

manufacturing or making of products that were demanded by the customer. In
this stage, the products are designed, produced, tested, packaged, and
synchronized for delivery.

Here, the task of the supply chain manager is to schedule all the
activities required for manufacturing, testing, packaging and preparation for
delivery. This stage is considered as the most metric-intensive unit of the
supply chain, where firms can gauge the quality levels, production output and
worker productivity.

The Product Development within Hospitality Environments

Product development can be recognized as the examination of

product and services to recognize the probability of improvement, earnings as
well as the client satisfaction. This technique is important in changes of
existing products to handle discovered opportunities and the modern
marketing trends. It could provide the much better quality for the product and
the client satisfaction. Product development process should be consisting of
knowledge on the merchandise weaknesses and advantages, modern
marketing tendency which is facilitated by the advanced technology.

According to the Kotler's primary of product development, three

phases of product such as center product, augmented product and tangible
product. Basic level of every selling product is known as the central product.
For a good example, Hilton hotel holiday resort may provide well-appointed
rooms, excellent dinner and the other services for their customers.

Augmented product can include the excess services and value-added

services, which might give their customers. For an example, fitness center
facilities, spa facilities and the other packages relevant to the different sports
activities. The client can recognize tangible products as the products that can
be in physical form feel. For a good example, restaurant of Intercontinental
Sea Bq provides sea foods for the customers.

Product development process five major steps can be diagnosed.

 Generation of Idea
 Screening process
 Evaluation of Idea / Development of Concept
 Product development / Business Analysis
 Commercialization process

Idea technology process may be considered a result of market

research. It might be the confirmation of a requirement of a product or service
predicated on existing consumer need. Inside the screening process, ideas
may be gathered from media, customers and employees. By, using those
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IM – HPC 7 – SECOND SEM. 20 – 21
NUEVA VIZCAYA STATE UNIVERSITY Bayombong,
Nueva Vizcaya

INSTRUCTIONAL MODULE

ideas, the expected competition for the merchandise may justify based on the
market trends. Income, cost as well as the expected earnings may recognized
in the idea evaluation step, Market research may be important with regards to
this step. In this step, the expected first customers may illustrate theoretically.
In the merchandise development step, physical production and making
process can do and the selling price could also determine. Not merely will
that, evaluation of the merchandise also be done. As the last step, the
production marketing campaign process may be achieved in the
commercialization process.

4. Deliver

The fourth stage is the delivery stage. Here the products are delivered
to the customer at the destined location by the supplier. This stage is
basically the logistics phase, where customer orders are accepted and
delivery of the goods is planned. The delivery stage is often referred as
logistics, where firms collaborate for the receipt of orders from customers,
establish a network of warehouses, pick carriers to deliver products to
customers and set up an invoicing system to receive payments.
5. Return

The last and final stage of supply chain management is referred as the
return. In the stage, defective or damaged goods are returned to the supplier
by the customer. Here, the companies need to deal with customer queries
and respond to their complaints etc. This stage often tends to be a
problematic section of the supply chain for many companies. The planners of
supply chain need to discover a responsive and flexible network for accepting
damaged, defective and extra products back from their customers and
facilitating the return process for customers who have issues with delivered
products,

Supply Chain Management - Process Flow

Supply chain management can be defined as a systematic flow of

materials, goods, and related information among suppliers, companies,
retailers, and consumers.

There are three different types of flow in supply chain management −

 Material flow
 Information/Data flow 
Money flow

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IM – HPC 7 – SECOND SEM. 20 – 21
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INSTRUCTIONAL MODULE

 Material Flow

Material flow includes a smooth flow of an item from the producer

to the consumer. This is possible through various warehouses among
distributors, dealers and retailers.

The main challenge facing is to ensuring that the material flows as

inventory quickly without any stoppage through different points in the
chain. The quicker it moves, the better it is for the enterprise, as it
minimizes the cash cycle. The item can also flow from the consumer to
the producer for any kind of repairs, or exchange for an end of life
material.

 Information Flow

Information/data flow comprises the request for quotation,

purchase order, monthly schedules, engineering change requests, quality
complaints and reports on supplier performance from customer side to the
supplier.
From the producer’s side to the consumer’s side, the information
flow consists of the presentation of the company, offer, confirmation of
purchase order, reports on action taken on deviation, dispatch details,
report on inventory, invoices, etc.

For a successful supply chain, regular interaction is necessary

between the producer and the consumer. In many instances, we can see
that other partners like distributors, dealers, retailers, logistic service
providers participate in the information network.

In addition to this, several departments at the producer and

consumer side are also a part of the information loop.

 Money Flow

On the basis of the invoice raised by the producer, the clients

examine the order for correctness. If the claims are correct, money flows
from the clients to the respective producer. Flow of money is also
observed from the producer side to the clients in the form of debit notes.
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INSTRUCTIONAL MODULE

In short, to achieve an efficient and effective supply chain, it is

essential to manage all three flows properly with minimal efforts. It is a
difficult task for a supply chain manager to identify which information is
critical for decision-making.

Returns Management

Returns management can be defined as the management that invites

the merger of challenges and opportunities for inbound logistics. A
costeffective reverse logistics program links the available supply of returns
with the product information and demand for repairable items or re-captured
materials. We have three pillars that support returns management processes.
These are as follows:
• Speed - It is a must to have quick and easy returns management and
automate decisions regarding whether to produce return material
authorizations (RMAs) and if so, how to process them. Basically, the tools
of speed return processing include automated workflows, labels &
attachments and user profiles.
• Visibility - For improving the visibility and predictability, information needs
to be captured initially in the process, ideally prior to delivering the return
to the receiving dock. Most effective and easily implementable
approaches for obtaining visibility are web-based portals, carrier
integration and barcoded identifiers.
• Control - In case of returns management, synchronizing material
movements is a common issue that needs to be handled. The producers
need to be very cautious and pay close attention to receipts and
reconciliation and update the stakeholders of impending quality issues. In
this case, reconciliation activates visibility and control all over the
enterprise. The key control points in this process are regulatory
compliance, reconciliation and final disposition and quality assurance.

Post - Sales Service

Now that the ordered shipment is over, what is the next step? The
post sales service in supply chain tends to be an increasingly essential factor
as businesses offer solution instead of products.

The post sales services comprise selling spare parts, installing

upgrades, performing inspection, maintenance and repairs, offering training &
education and consulting

Presently, with the growing demands of the clients, a high volume of

after sales service proves to be a profitable business. Here, the services are
basically heterogeneous and the value-added services are different from
those provided prior to sales service.

Consumables in Hospitality

Regardless of how large or small your hotel is, just imagine how bad it
would be if you could not supply your guests with breakfast because you had
run out of supplies. What happens if you use all of your beers and have none

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INSTRUCTIONAL MODULE

to replace them? When evening meals are due, how embarrassing it would
be to say you can only offer half the menu because you do not have the
products to complete all the meals shown.

The same applies to restaurants. Not being able to fulfill their menu
looks really bad and will stop customers returning. A bar that runs out of wine
or beer will suffer by customers going elsewhere, and once they have done
that, it is hard to get them to return to your establishment

Successful businesses are built on loyal customers bases, but this will
not happen with yours if you keep letting customers down. Food and drink are
an important part of any hotel stay, and eating out is often part of consumers'
vacations. It is vital that you can fulfil your obligations with food and drink, and
effective chain supply management is the way to do it. Without it, there would
be no foods in restaurants and no beer or wine in bars, and that will basically
kill the hospitality that your venture should be providing. Your establishment
also needs to have enough clean bed linen to be able to change it when
required, and an ample supply of things such as table napkins, cutlery and
crockery. This might all seem very obvious, but you would be surprised by
how many hotels fall down in these areas.

Implement Supply Chain Management in Hotel Industry

Different concepts have been developed to understand how the

successful implementation of logistics and supply chain management can be
achieved. For the hotel industry logistics and supply chain activities are
grouped into tactical, strategic and operational levels to help create a more
systematic approach by focusing on how implementation will happen from a
higher level, then linking that to long-term goals and finally how these results
translate in the short-term.

a. Tactical Level

Executive support-The tactical level of implementation of logistics and

supply chain management focuses on steps that are taken at a higher level
for successful implementation. It is important that, during the tactical stage of
Implementation there is 100% executive support and buy-in from senior
managers and having the right people in place who understand the value
logistics and supply chain implementation will bring to their properties.
Managers need to take a lead in communication and making sure all
employees understand why the initiatives are essential to the company's
business strategy.

Visibility and Control-It is important to have visibility and control to

implement logistics and supply chain practices to help make better decisions.
The hotel environment has seen an increase in the need for visibility and
control to help understand the decisions made by vendors and suppliers to
help managers make well-informed logistics and supply chain decisions. This
helps hotel managers make important decisions on parts of costs in areas of
transportation and shipping

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NUEVA VIZCAYA STATE UNIVERSITY Bayombong,
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INSTRUCTIONAL MODULE

Benchmarking-This goal of benchmarking during logistics and supply

chain implementation is to enhance design and operational effectiveness. It is
important for hotel managers to measure set targets against results in the
different areas of operation like order filling, transportation, and vendor
compliance. Hotels can use information from benchmarking to improve
processes and make better decisions.

Creative solutions and risk taking-The goal of developing creative

solutions and willingness to take risk during logistics and supply chain
implementation is important since a lot of focus has been placed on reducing
costs and increasing margins wherever possible. This helps focus on
negotiating better costs and focus is placed on the customer's demands.

b. Strategic Level

Change management-The strategic level of implementation of logistics

and supply chain management is linked to the long-term benefits over a
period of time. Change management plays a big part in logistics and supply
chain implementation in different areas, from making changes to the whole
process or fixing issues with vendors. With the fast pace of the hotel industry
during implementation, it is important for managers to think and act in real
time to help enable innovation and change, as people will always challenge
the process.

Think Lean and Green-Even though lean started in the automotive

industry, it can be used in any business process like in the hotel industry.
Hotel managers need to use lean strategies when logistics and supply chain
is implemented immediately instead of later. Since lean is focused on the end
user, the main focus during implementation is to maintain profitability, save
money, and add value that fulfills customer needs. During the lean
implementation phase, it is important for managers to identify the service
value stream focusing on design layout, development, procurement, and
distribution process strategies.

Top talent and Accountability-When implementing logistics and supply

chain management in any company, it is important to be able to sustain the
implementation, which involves building a solid foundation that includes top
managers to drive the process with deep expertise in logistics and supply
chain functions and business skills.

Right information technology-Today as information technology has

become an important and integral part of every business process, when
implementing logistics and supply chain management in the hotel industry, it
is important to have the capabilities of ensuring that most company decisions
are done at the speed of light. With the right information technology, the hotel
can communicate information on supply chain and demand changes easily in
areas of inventory, distribution, transportation, and logistics management,
since the accurate information is produced due to the analytical and visibility
capabilities to make efficient business decisions quickly.

c. Operational level Costs-

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NUEVA VIZCAYA STATE UNIVERSITY Bayombong,
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The operational level of logistics and supply chain management

implementation focuses on decisions that are related to how to make the
tactic approach happen in the short term. Today hotel costs associated with
logistics and supply chain strategies have placed the emphasis on increasing
efficiency and reducing total costs to stay competitive (IBM, 2009). During
implementation, cost need to focus on purchase and inventory costs. It is
important to monitor purchase with products that have a short life cycle and
have to be replenished frequently, since hotels usually buy too many
stockkeeping units (SKU) for same use.

Simplifying complexities-It is important in logistics and supply

implementation for hotel managers to manage strategies to eliminate
complexities that do not add any value to the organization. It is important that
logistics ay supply chain functions are broken down into different areas based
on which are matter the most in the supply chain. This segmentation helps
hotel managers easily identify the relationship between costs and price with
suppliers and helps negotiating better prices.

Right metrics-Applying key performance indicators (KPI's) to logistics

and supply chain operations during implementation is vital to help monitor
how well suppliers and vendors are meeting set targets, which helps improve
top and bottom-line performance. Starbucks created a weekly scorecard to
monitor third party carrier performance in areas of costs, service, and
productivity agreed upon with their partners. Applying KPI's to operations will
help create transparency, improve costs and help serve customers better, as
well as lay the foundation for future logistics and supply chain initiatives.

Risk management-Considering risk management is critical during

logistics and supply chain implementation for hotel managers in order to
evaluate risk associated with implementation in their strategy. Managers
should have a good understanding of the benefits involved with sharing risk
information across the network.

VI. LEARNING ACTIVITIES

1. Explain how does supply chain management work?

2. Discuss each of the components of supply chain management.
3. Describe how product development occur within hospitality environments.

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INSTRUCTIONAL MODULE

VII. ASSIGNMENT

1.

1. Discuss the strategies in Assessing Existing and New Hotel Supply; and 2.
Enumerate and explain the process of Supplier Selection.
3. Identify the Tools of Supplier Selection

VIII. EVALUATION

 Note: Online Evaluation

IX. REFERENCES

A) Book/Printed Resources

De Castro, Kayla S. 2021. Supply Chain Management in the Hospitality Industry, Edric Publishing
House, Sta. Cruz, Manila.
Eastham, Jane F., Sharples, Liz, Ba, Stephen D. 2001. Food Supply Chain
Management Issues for the Hospitality and Retail Sectors. Reed
Educational and Professional Publishing Ltd
Grant, David B., Trautrims, Alexander, Yee Wong, Chee. 2017. Sustainable
Logistics and Supply Chain Management, 2nd Edition, Published in Great
Britain and the United States in 2013 by Kogan Page Limited.
Jenkins, Andrew Kevin, Cameron, Derek and Crompton, Richard (2015) Supply
Chain Management in the Hospitality Industry: A research agenda. In: Asia
Pacific CHRIE Conference 2015: Hospitality and Tourism in a Greening
World, 10th - 13th June 2015, Auckland, New Zealand.
Lu, Dawei. 2011. Fundamentals of Supply Chain Management, Ventus
Publishing ApS ISBN978-87-7681-798-5

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Odoom, Clement K., "Logistics and Supply Chain Management in the Hotel
Industry: Impact on Hotel Performance In Service Delivery" (2012). UNLV
Theses, Dissertations, Professional Papers, and Capstones. 1339.
Sethu, H.S. Supply Chain Management In Hospitality Industry: An Overview.
Journal of Hospitality Application & Research, BIT Mesra, Ranchi Valley
View, Manipal, Karnataka – 576 104

B) e-Resources

https://www.tutorialspoint.com/supply chain
management/supply_chain_management _introduction
https://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103651320190001002
11 https://blog.vendinggroup.com/top-procurement-solutions-for-hotel-
management https://hotelinvestortoolbox.com/new-hotel-supply/
https://www.revfine.com/revenue-management-strategies-hotel-industry/
https://testmyprep.com/subject/tourism/the-product-development-within
hospitality
https://cynoteck.com/blog-post/the-need-of-crm-in-hotel-industry/
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http://dx.doi.org/10.34917/3253876
http://www.hilton.com
https://image3.slideserve.com/5698150/competitive-and-supply-chain-
strategiesl.jpg
https://scm.ncsu.edu/scm-articles/article/what-is-supply-chain-management-scm
http://eprints.hud.ac.uk/id/eprint/24977/
https://www.digitalconnectmag.com/the-significance-of-supply-
chainmanagement/
https://www.indeed.com/career-advice/career-development/what-is-supply-
chainmanagement-and-why-is-it-important
https://baelearn.uncg.edu/wordpress/scm655/supply-chain-saves-the-
worldchapter-6-practitioners-guide/key-concepts/
https://blog.arkieva.com/what-is-bullwhip-effect/
https://www.tutorialspoint.com/supply_chain_management/supply_chain_manag
ement_process_flow.htm

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HPC 7 - Supply Chain Management in the Hospitality Industry |

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