Supply chain management is important in sectors like hospitality. A hotel supply chain incorporates features of manufacturing and service supply chains. There are six key characteristics of a hotel supply chain: perishability of products/services, presentation/interpretation of products, complexity of products/services, demand uncertainty, inseparability of production and customers, and bundled tourism packages. Effective supply chain management can help hotels reduce costs, improve quality and service, and gain a competitive advantage. The objectives of supply chain management include achieving strategic advantages, cost control/reduction, enhancing outsourcing capabilities, globalization, better inventory management, effective resource use, reduced lead times, on-time delivery, and improved customer service.

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STOCKS
MANAGEMENT
INDUSTRY
BENEFITS
CHARACTERISTICS
IMPORTANCE
CUSTOMER SATISFACTION

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14. CHAPTER 2:
SIGNIFICANCE OF SUPPLY CHAIN
MANAGEMENT IN THE HOSPITALITY
INDUSTRY
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15. CHAPTER
OBJECTIVES:
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16. At the end of chapter,the student must be able to:
1. Understand the hotel supply chain.
2. Realize the significance of supply chain
management in the hospitality industry.
3. Explain the characteristics of a hotel supply chain.
4. Explain the factors affecting supply chain
management in hotel industry.
5. Understand the benefits of supply chain
management.
6. Realize the importance/objectives of SCM.
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Supply chain management is
much more important than placing
orders with suppliers and there are
more some sectors where it is
important than others,with
hospitality being a common
example.

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One area of the hotel industry that is
usually left out in cost cutting efforts is its
logistics and supply chain operations.
Logistics and supply chain is considered an
operations management strategy in the hotel
and other service industries,they can use
strategies to help add value to their properties.
And the supply chain is an important element
within the hotel and catering industry.

19. A well established logistics and supply chain
management system can help the hotel industry give
individual hotel companies a sustainable competitive
advantage. The use of the right logistics and supply
chain strategies helps not to only improve the quality
and service of the Hotel Company,but drive down
costs. The hotel industry can benefit from the
comprehensive and integrated practices of logistics
and supply chain management,by delivering
consistently reliable and high quality service at the
best costs.
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20. THE HOTEL CHAIN
SUPPLY CHAIN
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Food and beverage
producers
Furniture producers
Water and energy
suppliers
Complimentary
Producers
LOGISTICS
HOTELS
RESTAURANTS
GUESTS/
CUSTOMERS
UPSTREAM CENTER DOWNSTREAM
SUPPLIERS
CUSTOMERS

22. A hotel chain supply chain
incorporates features of both
manufacturing and service supply
chains. There are six
characteristics of a hotel supply
chain have been identified at the ff:
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23. Six characteristics of a hotel supply chain
-Perishability of products and services rendered
- Presentation and interpretation of the products
offered
-inherent complexity of products and services
- uncertainty of demand
-Inseparability between service production and the end
customer
-Tradition sale of tourism service packages
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24. FACTORS AFFECTING
SUPPLY CHAIN
MANAGEMENT IN HOTEL
INDUSTRY
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25. -Guest or customers are the most important for
the hotel industry; customer satisfaction is of
paramount importance to the hotel industry.
Customer related activities such as food and
beverage production and service, housekeeping,
front office management are given utmost
importance. The back office operations such as
the accounts, purchases,supplies chain
management,revenue recording etc,take a back
seat.
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26. -Different types of management
systems,such as the ownership hotels,
franchises, hotels which are run on operating
contracts by chains etc. The different
managements systems have different
implications on the supply chain
management.
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27. -In the hotel industry, all the efforts are
customer oriented as result lot of cost reduction
which can be attained through improved
upstream functions of supply chain management
is lost.
-Current trend in the industry show that
computerized property management systems are
used but mainly for front office management and
reservation systems.
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BENEFITS OF SUPPLY
CHAIN
MANAGEMENT

29. -The supplier and the hotel profit from a
well-established supply chain
management framework. Due to
competent management in the context
of developing proper buying
strategies,the relationship between the
supplier and the hotel is better.
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30. -It leads to significant reduction in costs and
also helps continuous evaluation and
improvement in the buying process. It could
increase the product range or perhaps reduce it
too,because of intensive market research
undertaken.
-Improved management information to future
requirements.
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THE NEED FOR SUPPLY
CHAIN MANAGEMENT

32. 1. Need to further reduce operational cost
-companies have done much to reduce their
operations cost within the organization through
Business Process Reengineering (BPR) , Enterprise
resource planning (ERP), Total Quality Management
(TQM) ,Total Productive Maintenance (TPM) ,Lean
manufacturing, Just-in-Time (JIT) ETC.
- There are still scope for improvement and cost
reduction in the areas of supply side,delivery side
and logistics of the company.
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33. 2. Increased outsourcing requirements
Out sourcing activities of companies are on
the increase. This also increases the cost associated
with procurement,distribution and logistics,offering
scope for substantial efficiency improvements and
coordination beyond its production activities.
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34. 3. Increasing transportation cost
Transportation cost account to
5 to 30% of the operating expenses of
the company. It needs focus to reduce
cost.
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35. IMPORTANCE / OBJECTIVES OF SUPPLY
CHAIN MANAGEMENT

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1. Achieve strategic advantage
SCM gives competitive edge to the
firm ensuring smooth and systematic flow of
goods, information and funds.
Underperformance of one link in the supply
chain can destroy strategic advantage of all in
the supply chain

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2. Achieve Cost control/reduction
Reduce all company costs by optimizing the cost of freight and logistics
• Decreases Purchasing Cost - Retailers depend on supply chains to
quickly deliver expensive products to avoid holding costly inventories in
stores.
•Decreases Production Cost - Manufacturers depend on supply chain
store reliably deliver materials to assembly plants to avoid material
shortages that would shutdown production.
•Decreases Total Supply Chain Cost - Manufacturers and retailers
depend on supply chain managers to design networks that meet
customer service goals a the least total cost.

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3. Enhances outsourcing capability
•Out sourcing generally reduces the cost
of operation of a company.
• An efficient and cost effective SCM
system will enable the firm to reap the
benefits outsourcing.

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4. Achieve Globalization
• Helps to operate across world market.
• Helps to make the product available in existing
and new markets at competitive price.
• SCM helps to meet global competition
successfully.

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5. Better Inventory management
• Eliminate the necessity to stock the
items in large quantities.
• Ensure availability of goods in right
quantity at right price with right quality at
the right time.

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SUPPLIER PRODUCER DISTRIBUTOR RETAILER CUSTOMER

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6. Effective use of supply and logistic resources
• Few dedicated suppliers
• Dedicated transportation and logistics.
• Participation of suppliers in quality improvement, design
improvement, value engineering and new product
development through Design Collaboration
• Competitive, participative and collaborative pricing with
suppliers and logistics providers by sharing benefits mutually

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7. Reduced lead time by design
collaboration
• Lead time for product improvement
is less
• New product development time is
shorter

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8. Achieve on time delivery
• Ensure prompt delivery of
product and services to
customers on time.

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9. Facilitate e-commerce
• Introduction of e-commerce and e-
business gives an entirely new dimension
to buying and selling using internet which
enhances operational efficiency and
customer satisfaction

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10. Boost Customer Service
• Customers expect the correct product assortment
and quantity to be delivered.
• Customers expect products to be available at the
right location.
• Right Delivery Time - Customers expect products
to be delivered on time

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DO YOU HAVE ANY
QUESTIONS?
CLARIFICATIONS?

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PAPER)

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QUIZ

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1. Why is it important to know the significance of
Supply Chain Management in the Hospitality
Industry?
ENUMERATION.
2-5 Give atleast 4 characteristics of a hotel supply chain.
6-7 Give atleast 2 needs for supply chain management.
8-12 Give atleast 5 importance / objectives of Supply
chain management.
13-15 Choose one importance/objectives in Supply
Chain Management. Explain.

51. Thank you for
listening!
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