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The document discusses a case study of the Sun International Hotel Chain in South Africa. It found that the hotel chain had not intentionally sourced from local small and medium enterprises (SMEs) in their supply chains. Each hotel property managed its own contracts and preferred suppliers without oversight from head office. This exposed the whole chain to long term risk by not increasing sourcing from local SMEs as required to renew their licenses. Additionally, SMEs faced more stringent conditions than large suppliers, which would inevitably replace them. The document calls for interventions to resolve these problems and implement a range of supply chain relationships, as well as consider new areas in supplier relationships based on this case.

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Angeline Sumaoy
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366 views2 pages

Untitled Document

The document discusses a case study of the Sun International Hotel Chain in South Africa. It found that the hotel chain had not intentionally sourced from local small and medium enterprises (SMEs) in their supply chains. Each hotel property managed its own contracts and preferred suppliers without oversight from head office. This exposed the whole chain to long term risk by not increasing sourcing from local SMEs as required to renew their licenses. Additionally, SMEs faced more stringent conditions than large suppliers, which would inevitably replace them. The document calls for interventions to resolve these problems and implement a range of supply chain relationships, as well as consider new areas in supplier relationships based on this case.

Uploaded by

Angeline Sumaoy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Good Procurement Practices and SMEs in Supply Chains: Lessons Learned from

the Sun International Hotel Chain in South Africa Case Study

by Carole Favre (2017)

A few years back, Sun International Group embarked on an introspective journey


to decide if and how it had effectively sourced from local SMEs. None of the company’s
assets could identify a motive: they had not done anything to “to cause this to happen”.
He concluded that it was purely coincidental; “the SMEs only happen to end up where
they were necessary, at the time they required”.

In fact, until now the managing director of each property takes the ultimate
contractual determination, the head office has been unable to pressure hotels to use
vendors it recommends until now. Deviance from group standards can be escalated but
complaints are based on random reporting, which is not enough to build strong
evidence of repeated non-compliance (audits of hotels used to take place but these
were too costly to maintain). It can also be a very antagonistic procedure, creating
tension between the operational and executive arms of the group. One major barrier to
change is culture within the organization: the resistance comes at the operational level
because hotel managers are used to dealing with their preferred suppliers (“I like you,
let’s do business together”), and are unwilling to take risks. Additionally, they are
reluctant to source from a variety of suppliers: one SME alone cannot replace a
multinational enterprise; hence the same job needs to be undertaken by two smaller
companies, and very few hotels want to manage a multi-supplier chain for a single
service. The difficulty with such behavior is that it shifts the risk from the hotel/casino as
a unit to the whole group: what appears to be a safer approach in the short-term for the
property manager is exposing the chain to long-term risk, as local sourcing from SMEs
must increase for the license to be renewed.

A second issue with the current scheme is that not all vendors are handled
similarly, with big manufacturers being treated with caution to ensure stability and
affordability. At the same time, SMEs are forced to confront more stringent conditions,
so they will inevitably be replaced. Furthermore, MSMEs are expected to be grateful for
the business they have got, so they must be market competitive, provide a high-quality
commodity, provide consistent customer service, and retain their Broad-Based Black
Economic Empowerment (B-BBEE) rating.

Questions:

1. Discuss the problems evolving in the case of Sun International Hotel Chain
2. What interventions will be developed to resolve the problems of Sun International
Hotel Chain?

3. What range of supply chain relationships should be implemented? Elaborate your


answer.

4. Identify the new areas that should be considered in supplier relationships based on
the case of Sun International Hotel Chain.

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