SUPPLY CHAIN MANAGEMENT HOTEL INDUSTRY CHALLENGES & BEST PRACTICES (2024)

Abstract

Logistics and Supply chain management in the hotel industry is of great importance and significance. Supply chain management or SCM is popularly known as integral and indispensable part of the hotel industry. The role of supply chain management in the hotel industry is crucial towards sustained competitive advantages.

Implementation of a successful supply chain is a challenge in the hotel industry as demographics of every geographical location are different. A well-managed supply chain can be the key difference between a successful and unsuccessful hotel operation but Habits of the people, trends, weather, local legislations, infrastructure, products availability and so many other things effects on the supply chain of the Hotel industry and one uniform policy across the globe is not possible to be implemented. Hotel industry is face to face with the complex challenges and Supply chain being the backbone of the Hotel Industry, is the leading department which counters all these challenges and fulfill the due requirements of the operations.

If we can define the role of the Supply chain management in summarized way, following is the best-defined elaboration which suggested by some great intellectual.

Role of Supply Chain Management

The Lean paradigm

• Focus on reducing non-Value addition activities and best possible waste management.

The Agile paradigm

• Create the ability to respond rapidly to the changes required in quantity, quality, and variety.

The Resilient paradigm

• Create an ability to cop with the unexpected disturbances by flexible supply base and economic supply incentives

The Green paradigm

• Environmental preferences should be on the top of the mind while planning supply chain and operations.

Challenges

The hotel industry is an extremely diverse industry where the challenges range from local to international and are in a big number. Global Supply Chains related to the Hospitality Industry are going under serious consideration to the level of sustainability they entail. Hospitality incorporates food and beverages, non-food items, furniture and equipment and more, so the range of the items is large and so is the No. of Suppliers. The challenge is bigger to maintain a sustainable supply chain of quality products at the right time in the right Qty and at the right cost.

There are three main challenges of sustainable supply chain in hotel Industry.

• Supplyof the items in the Right Qt at the right time
• Planning to foresee the Price Volatility and right planning to keep it as low as possible.
• Planning to foresee the Uncertainty with respect to demand, trends, market and availability.

These challenges are further elaborated as under to be more précised and to enlist for their individual treatment through best practices which is the later part of the article.

1. The hotel industry has an extremely complex supply chain.
2. There are multiple stakeholders involved in the supply chain of the hotel industry.
3. Usually, a large inventory is required which increases inventory holding cost.
4. A huge number of perishable goods can account for wastage and increased cost.
5. External factors and Seasonality of the hotel industry make it difficult to forecast requirements accurately.
6. Political and Economic situation directly affects the Hotel industry.
7. Government Policies regarding tourism is the key factor is success of hotel industry.
8. Variable demand of the hotel industry is a key challenge as it makes it difficult to have uniformity in the SCM processes. Cancellations and external factors add to the trouble.
9. Product lifecycle traceability is a key challenge leading to additional wastage.
10. New competition and emerging markets can disrupt the existing supply chain leading to new players.
11. Automation is a boon and a challenge as well as adding new players in the supply chain while dislodging a lot of others leading to a continuously evolving ecosystem of logistics and supply chain.
12. Due to a lot of products leading to numerous suppliers, supplier performance can be a key challenge leading to unnecessary disruptions in supply chain management.
13. Transportation and other logistics constraints can always pose a challenge to the hotel industry.
14. Creation of new demands from customers due to innovation and changing service patterns.
15. Lack of training regarding logistics and supply chain within the hotel industry.
16. There are multiple other challenges in the hotel industry but most of these can be negotiated through a proper supply chain strategy and through utilizing best practices of supply chain management for the hotel industry.
17. Due to sudden change in various cost factors and sudden change in demand trends, pricing of the products is more volatile than ever and long terms financial planning in supply chain is next to impossible now. It is a key challenge towards sustainable supply chain management.
18. Last but not least, in today’s world communication is the key to success. Fast and effective communication is becoming a challenge for the supply chain and ever-changing technological solutions is the only key to get success on this front. Supply chain must be on their toes for influx of information horizontally and vertically to get the right and intime decisions for sustainable and effective supply chain.

Best Practices

The hotel industry is a huge industry which has a global footprint. Thus, the SCM in the hotel industry can be extremely complicated, especially for the large hotel chains. We have discussed some key challenges which hotel Industry is facing in common in modern day world and need to be countered through some common best practices. Have a look at some of the best practices below.

Automation of Operations and Information through advances IT system

Information systems in the Hotel industry refer to computer systems (ERP) in a hotel that supply information about that hotel’s business operations. In the current technology era, this is as crucial as it can get. Information systems play a crucial role in the hotel industry as they facilitate planning, management, and overall operations of the hotels as well as policymaking. Current hospitality information systems are much more advanced owing to the latest technological innovations. Information systems typically include all computerized systems which are used to gather data continuously both for use internally and externally.

Procurement Tactics and Strategy

Before making a strategy or adopting any tactics for procurement management, we must know with precise details that what are the requirements, from where these can be fulfilled, when to be fulfilled and most important cost effective solutions.

Following are some of the questions which must be on the top of the mind before making any strategy.

• What are the current and requirements of your hotel?
• What are the best possible sources to fulfill these requirements?
• What is the lead time for the procurement for the different categories of the items?
• What is the shelf life of the different categories of the items?
• What is our storage capacity?
• What are current and future trends of the market as hotel is all about the wishes of the people and Hotel has to be on the toes to check the pulse of the market trends.

There are numerous questions like this which must be a part of your supply chain strategy.These need to be answered within the team.Streamlined processes help in minimizing wastage and risk. So, it is crucial to come up with a detailed and clear supply chain strategy for your hotel. Planning is everything and according to studies, planning must be 75% of your actions and execution is the 25% of the action. It means that a best strategy without proper planning of execution can be a big failure and weak strategy can be success with proper planning. When we are talking about the procurement strategy, we are talking about the huge capital investment to fulfill the needs and requirements and if this capital is thrown in the market without proper thought-out plan, it will be total waste and may be result into dissatisfaction of the customers and ultimately failure of the business.

Inventory Turnover and Inventory Velocity

To save costs it is important to improve inventory turns. Higher inventory velocity improves inventory turns. When you are considering hotel room supplies like linen, bedding, quilt, pillow, mini bar items, cutlery etc. the inventory velocity becomes more important.

Inventory turns equals ‘Cost of Goods sold’ / ‘Average Inventory on hand.’

Inventory velocity is the speed of products within the supply chain. Simply said, it’s the time period from purchase order of a retrial to the sale of the finished good. But, that’s a bit complicated in the hotel industry due to various suppliers.In hotel Industry we are talking about different categories of items from daily perishable goods to fixed assets with life of many years. The following are key questions in front of the planners while looking into the inventory turnover.

• Saleable or non-saleable items.
• Directly saleable or convertible item
• Shelf life of the item
• Rooms Lillian, toiletries and other house keeping items to be regularly used in hotel industry.
• Decoration items all over the Hotels
• Cutlery and crockery of the hotel
• All other items which are the day to day requirements of the Hotel industry

While planning the turnover this question must be on the top of the mind that how can we increase the turnover with efficient management and planning. Communication of all stakeholders is the key to the planning of the turnover of to its maximum.

Lean Logistics

Lean logistics is all about reducing waste. A lot of techniques like First in First out, automated ordering, proper forecasting, quicker deliveries etc. need to be employed in the hotel industry to minimize wastage. Due to uncertain sales trend and demand, this is crucial for the hotel industry to maintain a balance

Here are some of the useful tips to move towards lean logistics.

• Booking data should be integrated into an effective way of ordering.
• Historical data are useful for eliminating waste.
• Pooling resources (even with hotel competitors) to minimize waste can be effective.
• Suppliers with lesser turnaround time should be sourced.
• Greater usage of automation.
• Using First in First out during storage for perishables and other food-related products.
• Real-time inventory monitoring is crucial.

There are numerous other measures popular in various industries to ensure that measures for lean logistics are incorporated in an effective manner.

Effective Storage Management

Storage is big challenge in hotel industry as storage standards for different categories of the items. Here are some of categories of items for which Hotel industry has to maintain separate storage.

• Fruit and vegetables
• Meat and Fish
• Beverages
• Spices and Food mixtures
• Food Grade and Nonfood grade Chemicals
• Breakable items which mainly includes crockery
• Dry items
• Engineering items

Sperate storage is required for all above categories and with space limitation, effective storage planning coupled with effective procurement with minimum possible lead time is the key to best possible management.

Sincestorageis considered one of the most important sections of a hotel, it is important to follow an accurate inventory protocol. This will also lead to the hotel’s sustainability, and it will maximize the benefits for the hotelier. Especially before the end of the season, the department is required to settle its storage with the application of different techniques and contribute to the security of the hotel.

Following are some of the tips and techniques for effective storage management.

• For the successful operational management of the storage, it is important to carry out a thorough control of the stock of materials.
• Focus on ensuring the accuracy of the inventory process, as it will help you save money. Identify what the key objectives should be when recording the available stock of products.
• A Digital storage management maximizes the benefits for the hotelier. See how you could leverage new technologies to achieve your goal.
• Organize the minimization of your hotel stock on time. That will help you see in detail the ways in which you could use the products that were not consumed at the end of the season!
• Collect Data on Your Current Hotel Inventory
• Cross-reference Your Inventory With Occupancy Rates
• Assess the Purchasing Behavior of Your Guests
• Identify Patterns
• Estimate the Cost of Your Inventory
• Always Use Data to Support Your Decisions