Chapter 1 Introduction To Supply Chain

Ch 1 Understanding the Supply Chain
HMgt 125 Supply Chain Management in Hospitality Industry

Learning Objectives
• Discuss the goal of a supply chain, and explain the

impact of supply chain decisions on the success of
the firm.
• Identify the three key supply chain decision phases
and its significance.
• Describe the cycle and push/pull views of a supply
chain.
• Classify the supply chain macro processes in a firm
Tourism & Hospitality Product
• “bundle”
• Selected components to satisfy wants and needs.
Product Levels
• Core product – central to company’s operation
• Tangible product – special features of the product
– Brand, name, design, quality features
• Augmented Product
– Additional incredible features in to the product (after sales
guarantee)
Why study
Supply
Chain?
Basic Truth
I. Pervasiveness
– Organization make product or service that
someone value
II. Interdependence
– Organization function as part of a larger supply
chain
III. Profitability and Survival
– Manage their operations, prosper, survive
What is supply chain?
• involved in fulfilling a customer request (product
development, marketing, operations, distribution,
finance, customer service)
• Example: detergent supply - Prince Mall - distributor
What is supply chain?
• Integral part of the supply chain
• Movement of products from
suppliers to manufacturers to
distributors (information, funds,
products)
• Supply network or supply web
• Supply chain stages: customers,
retailers, distributors, manufacturers,
suppliers
WhatSupply Chains
is supply chain?
The connected chain of
Supply Chain all of the business
entities, both internal
and external to the
company, that perform
or support the logistics
function
What is supply chain management?
A management system that

coordinates and integrates
Supply Chain all of the activities
Management performed by supply chain
members into a seamless
process, from the source to
the point of consumption,
resulting in enhanced
customer and economic
value
Objectives of Supply Chain
• maximize the overall value generated
Supply chain surplus = Customer value – Supply

chain cost
• A customer purchases a wireless router from Greenware for

Php3,000.00
• Supply chain incurs costs (information, storage,
transportation,
• components, assembly, etc.).
• Difference between Php3,000.00 and the sum of all of these
costs is the supply chain profit.
• Supply chain profitability is total profit to be shared across all
stages of the supply chain.
• Measured by total supply chain profitability, not by

profits at an individual stage
• Customers is the only source of revenue
• Sources of cost = flow of information, products,
funds between stages
• Supply chain value = Maximize total supply chain
surplus
Importance of SCM in Hospitality Industry
• Right Logistics
– Help the industry give individual hotel companies a
sustainable growth advantage
– Improve the quality and service of the hotel company,
but drive down costs
– For staff in the industry, crucial to build steady
relationship with suppliers and with good ordering
system to improve service to guest.
Benefits of Supply Chain Management
Supply chain oriented companies

commonly report:
• Lower inventory, transportation,
warehousing, and packaging costs
• Greater supply chain flexibility
• Improved customer service
• Higher revenues
• Increased performance and
profitability
Decision Phases in a Supply Chain
1. Supply Chain Strategy or 2. Supply chain planning
design – decisions over the next
– How to structure the quarter or year
supply chain over the – Goal: to maximize the
next several years supply chain surplus that
– e.g. outsourcing or can be generated over the
perform a supply chain planning horizon given the
process in house constraints established
(increasing production during the strategic or
supply) design phase
Decision Phases in a Supply
Chain
3. Supply chain operation / OPERATIONAL
– Daily or weekly operations
– Base on individual customer orders
– Goal: to handle incoming customer orders in the best
possible manner
– E.g. allocate inventory or production to individual
orders, set a target date, shopping mode
– Reduction of uncertainty and optimize performance
Strategy or
design
Strategic supply chain decisions
– Locations and capacities of facilities
– Products to be made or stored at various locations
– Modes of transportation
– Information systems.
Supply Chain planning
• Definition of a set of policies that
govern short-term operations.
• Fixed by the supply configuration
from previous phase.
• Starts with a forecast of demand in
the coming year
Supply Chain planning
Planning decisions:
– Which markets will be supplied from which
locations
– Planned buildup of inventories
– Subcontracting, backup locations
– Inventory policies
– Timing and size of market promotions
Must consider in planning decisions—demand

uncertainty, exchange rates, competition over the time
horizon
Process views of a supply chain
1. Cycle View
Series division of cycles, each performed at the
interface between two successive stages of a
supply chain
2. Push/Pull view
processes in a supply chain are divided into two
categories depending on whether they are
executed in response to a customer order (pull)
or in anticipation of a customer order (push).
Customer order cycle
• Replenishment cycle
• Manufacturing cycle
• Procurement cycle
Cycle View of a Supply Chain
• Each cycle occurs at the interface between two
successive stages
• Customer order cycle (customer-retailer)
• Replenishment cycle (retailer-distributor)
• Manufacturing cycle (distributor-manufacturer)
• Procurement cycle (manufacturer-supplier)
• Figure 1.3
• Cycle view clearly defines processes involved and the
owners of each process. Specifies the roles and
responsibilities of each member and the desired
outcome of each process.
1-23
Push/Pull View of Supply Chains
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles
PUSH PROCESSES PULL PROCESSES
Customer
Order Arrives
1-25
Examaple: 7-Eleven
• What factors influence decisions of opening and closing stores?

Location of stores?
• Why has 7-Eleven chosen off-site preparation of fresh food?
• Why does 7-Eleven discourage direct store delivery from vendors?
• Where are distribution centers located and how many stores does
each center serve? How are stores assigned to distribution
centers?
• Why does 7-Eleven combine fresh food shipments by temperature?
• What point of sale data does 7-Eleven gather and what information
is made available to store managers? How should information
systems be structured?
1-26
Amazon.com
• Why is Amazon building more warehouses as it grows? How
many warehouses should it have and where should they be
located?
• What advantages does selling books via the Internet provide?
Are there disadvantages?
• Why does Amazon stock bestsellers while buying other titles
from distributors?
• Does an Internet channel provide greater value to a bookseller
like Borders or to an Internet-only company like Amazon?
• Should traditional booksellers like Borders integrate e-
commerce into their current supply?
• For what products does the e-commerce channel offer the
greatest benefits? What characterizes these products?
1-27

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What are the different views of a supply chain?

What are the objectives of supply chain management?

Ch 1 Understanding the Supply Chain

HMgt 125 Supply Chain Management in Hospitality Industry

• Discuss the goal of a supply chain, and explain the

A management system that

• maximize the overall value generated

Supply chain surplus = Customer value – Supply

• A customer purchases a wireless router from Greenware for

• Measured by total supply chain profitability, not by

Supply chain oriented companies

Must consider in planning decisions—demand

PUSH PROCESSES PULL PROCESSES

• What factors influence decisions of opening and closing stores?

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