SUPPLY CHAIN MANAGEMENT IN

HOSPITALITY INDUSTRY

Chapter 2: Supply Chain Operations:

Planning and Sourcing

Prepared By:
NIECEL MAE ADAY
ANGEL MARIEL ATIENZA
ARUELL SUZETT LIWANAG
TED WILLIAM CAPILI
BSHM 2107
 Introduction

The supply chain management mechanism is used by businesses to ensure a reliable and
economical supply chain. The supply chain consists of a series of steps a business takes to make
raw materials a finished product. With the diverse needs and wants of the customers in the
hospitality industry, the supply chain operations change and align with the fast-paced
requirements of the industry to plan, source, make, and deliver.

Learning Objectives At the end of this chapter, you should be able to:

1. Gain a conceptual appreciation of the business activities that drive supply chain
operations;
2. Exercise a high-level understanding of activities involved in supply chain planning and
sourcing;
3. Identify the basic concepts of demand forecasting and inventory management; and begin
to assess how well these activities operate within the hospitality industry.

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 PLAN
Demand
2. Source forecasting
Product pricing
Inventory
3. Make Management

4. Deliver
DELIVER
Order SOURCE
Management Procurement
Delivery Credit and
Scheduling Collections
Process Returns

MAKE
Product Design
Product
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.

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
2. Demand
3. Product Characteristics
4. Competitive Environment

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
2. Causal
3. Time Series
4. Simulation

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. Use varying levels of
total production capacity
 2. As appropriate, intend to retain increased production capacity as required 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.

Is the safest way to promote

products in PEAK times to
maximize revenues or offset
costs in SLOW periods?

PEAK cycles, where

SLOW times , where
companies can differ
businesses cannot shift staff
rapidly between workforce
and performance easily
and capability

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.

Three Kinds of Inventory Plan

1. Cycle Inventory
2. Safety Inventory
3. Seasonal Inventory

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.

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 purchase 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.

Is the acquisition procedure used by an organization to obtain the required products and services

Five Procurement Activities

1. Purchasing
A business buys two categories of goods:
o direct or strategic materials
o indirect and maintenance, repair, and service (MRO) supplies
2. Consumption Management
Effective sourcing starts by recognizing the number of goods being acquired in each
business unit and the whole enterprise.
3. Vendor Selection
In addition to merely the price of a component of a retailer, the importance of these
capacities must be considered.
4. Contract Negotiation
Contracts to procure indirect goods are easiest negotiated where vendors are chosen at the
lowest price.
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.
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 customer's 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.

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 QUIZ

1. Where companies can differ rapidly between workforce and capability?

2. A group of strategies that are used to control inventory levels in various supply chain
organizations.
3. Where businesses cannot shift staff and performance easily?
4. This is where the organization has the opportunity to monitor its suppliers' output and
keep them responsible for meeting the quality of service negotiated in its contracts.
5. Are the means of obtaining the funds a business needs?
6. Is the foundation of any business toward proper planning to satisfy consumer demand?
7. Is the acquisition procedure used by an organization to obtain the required products and
services.
8. It is founded on an individual’s intuition or beliefs.
9. It is based on trends of traditional demand.
10. Refers to the total demand for goods on the market.

11. to 14. four types of operations

15. to 17. Three kinds of Inventory Plan

18. to 20. Three Credit and Collection Activities