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1. PURCHASING AS PART OF
SUPPLY CHAIN
MANAGEMENT
CHAPTER 7
RHAIZA JANE O. BATAQUE

2. Introduction:
•Inventory Management is a series of procedures
employed to control inventory volumes through
various firms in the supply chain, the goal is to cut
inventory costs to the highest degree possible to
retain the quality of series needed by clients.

3. At the end of this chapter, you should be able to:
1.Identify the different forecasting technique used in the
hospitality industry.
2. Determine the different concepts in inventory management.
3. Assess the concepts, principles, and management of
purchasing as part of the supply chain in the hospitality industry.
Learning Objectives:

4. DETERMINING INVENTORY LEVELS
A number of variable influence incentory levels. Some of the most important listed as follows;.
1.Storage Capacity- Inventory goods must be obtained in appropriate quantities to be safely package and stored.
Frequently, the hospitality manager would not have enough storage space, this could necessitate more regular
delivery and keeping fewer of each commodity on hand than would otherwise be diserable.
2. Item Perishability for Food Items- If all food items have the same shelf life, that is the length of time a food
commodity keeps its optimum fresheness taste and consistecy when in stock, calculating the quantity of each item
you can have on hand will be easier unfortunately, the shelf life of food items differs significantly.
3. Supplier Delivery Schedule- Sellers will quickly remind you of the shipping schedule to a specific region or place.
A hospitality manager must use this knowledge to make informed choices about the amounts of the good of that
vendor you have to procure for work and protection.

5. 4. Potential Saving form Increased Purchase Size- Customers can learn that buying required products
in bulks will result in considerable savings. It can reduced packing ang delivery prices on their other
hand, result in lower per unit costs as bigger containers, bottles or cartons are ordered. Keep in mind
that there are costs involved with very big acquisitions, such as storage prices, spoilage, decay, pest or
rodent infestation, and burglary are examples of these.
5. Operating Calendar- When an operation is engaged in catering seven days a week to a reasonably
constant amount of guests the operational calendar has no bearing on inventory level decision making.
If, on the other hand, the service begins on Monday and ends on Friday for two days, the operational
calendar plays a significant role in deciding target inventory levels.
6. Relative Importance of Stock Outages- Many food service operations do not care whether they do
not enough of a particular food product or menu item. In other activities , even a single menu item
shortage may spell catastrophe. An error in the inventory amount of a minor ingredient that triggers an
outage may also be fixed with a fast ride to the grocery store for the tiny operator.

6. FORECASTING TECHNIQUES
Forecasting methods come in many forms. The process that will work best for the business must
be decided by the cost of forecast preparation and the necessary accuracy. There must be a cost-benefit
analysis between these two sectors to get the optimum outcomes;
1.NAIVE- This approach is founded on the premise that recent cycles are the best forecasters of future
cycles. As a result, the current actual forecast the estimate for the next period.
2.MOVING AVERAGE- This method seeks to eliminate unpredictability in a time series and smooth the data
curve. This forecasting method seems to lag a pattern, and the bigger lag, the more cycles utilized in the
average.
3.EXPONENTIAL SMOOTHING- This method is similar to moving average methods, except that the values
are weighted exponentially, providing more weight to the most recent data.When dealing with steady things,
this forecasting technique works effectively.

7. 4.LINEAR REGRESSION- This method is based on the asssumption of a cause and effect
relationship between a systems input and output.
5.MULTIPLE REGRESSION- This approach is focused on the premise of a cause and effect
relationship between a systems input and output.
6.JUST IN TIME- When deciding on inventory level utilizing the needed or just in time
approach, it is puchasing based on unit sales estimated to accomplish such sales. The
merchant is the only provided with the very bare minimum of inventory levels.
7.PAR LEVEL- Many food service managers establish a minimum par level by computing
working stock, then adding 25 to 50 percent more for safety stock. They an appropriate
purchase point or point at which additional stock is purchased, is determined.

8. PURCHASING AS PART OF SUPPLY CHAIN MANAGEMENT
Purchasing- to mean paying for an object or service.
Selection- refers to the act of choosing from among different alternatives at various stages.
In contrast of ＂SELECTION and PROCUREMENT"- Is can be characterized as an ordered, formal
transaction between a seller and a buyer.
1.Organizing- After developing a general strategy a buyer most coordinate the human and material
capital required to carry it out. However, at this point, the buyers voice may still be only one of many.
2.Staffing- These activities are often ideally tailored to the full time employee secretariat and the
workers of the procurement service. These workers obey the standard format of their work description,
it is divided into three broad scientific, intellectual, and human areas of competence.

9. 3.Training- Purchasing staff from entry-level companies typically requires preparation that includes
work and business orientation, professional training, and on the job training(OJT).
4.Budgeting- In operations requiring a full time purchases, the purchasing role will be expected to
comes the annual expenditures of service, such as the purchaser's salary and clerical costs.
5.Directing- The type of supervision is personal, the two good managers tend to be practicing the
same forms of supervision. In general, however a supervising approach is determined by top
management or an owner manager.
6.Controlling- A larger process requires an "indirect control scheme＂, which is mostly used to allow
someone, typically the controller, to maintain data of all the items in a computerized or
noncomputerized overlapping system. The manager can decide where the supplies are in the
hospitality business and how many are located by looking at the controller s summaries of problems
and receipts.

10. CHAPTER SUMMARY
Inventory Management aims to include a suitable operating inventory, the number of
ingredients that you expect to acquire when you purchase the component again, plus a
minimum safety greater demand than expected. In the inventory stage, the various
determinants include storage space, item perishability, supply schedule for suppliers, future
savings due to expanded buying scale, operational calendar, and the relative value of stock
exists.
Different Forecasting Techniques are being used as well in meeting the supply
needs and demands for the continous operation of the business. These techniques are
naive, moving average, exponential smoothing, linear regressions, multiple regressions, just in
time and par level.

11. The Procurement Goals are to ensure sufficient supply, minimize
spending,preserve efficiency, and preserve the competitive position of the firm.
Different Procurement Practices would be focused, on the other side, on
when to order, inventory levels control, quality requirements, specifications,
competitive bid, seller s inquiries, financial conditions control, supply tracking,
refund negotiation, administrative changes, warehouse arrangements, acceptance
of the purchase source,brand names accepted, supplier evaluation, and
negotiations.
Organization and Administration of Purchasing are composed of organizing,
staffing, training, budgeting, directing, and controlling.

12. THANK YOU
For Your
Attention