Supply Chain Management in Hotel Industry – Best Practices & Challenges

Logistics and Supply chain management in the hotel industry is of great significance. Supply chain management or SCM as it is popularly known as is an integral and indispensable part of the hotel industry.

Let’s look at this in details. Like our other posts, we will make every effort to keep the content simple yet comprehensive. 

Also, covered in this post are the best practices and challenges in supply chain management in the hotel industry.

Let’s begin!

Why is SCM in the hotel industry a key to success?

The role of supply chain management in the hotel industry is crucial towards sustained competitive advantages.

A well-managed supply chain can be the key difference between a successful and unsuccessful hotel operation.

 

Supply Chain Management in Hotel Industry - Best Practices and Challenges

 

This is due to the following key reasons:

  • The hotel industry has an extremely complex supply chain
  • There are multiple stakeholders involved in the supply chain of the hotel industry
  • Usually, a large inventory is required which increases inventory holding cost
  • A huge number of perishable goods can account for wastage and increased cost
  • External factors and Seasonality of the hotel industry make it difficult to forecast requirements accurately

Now moving to the best practices.

 

Best Practices- Efficient hotel industry supply chain management

 

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.

Have a look at some of the best practices of procurement below. Procurement is one of the keys and one of the most important tenets of overall supply chain management.

 

Image Courtesy- Pinterest

 

  • Automation holds the key

 

Think IT as it holds the maximum importance in cost strategy in the current knowledge economy. 

Automation of a lot of SCM processes in the hotel industry is possible now and a lot of hotel industry software companies have tailor-made solutions to streamline supply chain processes.

That too tailor-made for the hotel industry.

 

  • Have an established strategy

 

  • Do you know what are the requirements of your hotel for the next year?
  • How many blankets would be required to be replaced?
  • What about the cutleries?
  • How much perishable goods would be required based on occupancy forecast?
  • What is inflation like and will the prices change in the future for the products?
  • Who are the suppliers and are they reliable?

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 minimising wastage and risk.

So, it is crucial to come with a detailed and clear supply chain strategy for your hotel.

 

  • Inventory velocity is crucial

 

To save costs it is important to improve inventory turns. Higher inventory velocity improves inventory turns.

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. 

 

  • 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 minimise wastage.

Due to uncertain bookings and demand, this is crucial for the hotel industry.

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 minimise 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. 

 

  • Bring customers into your supply chain

 

Automation can make hoteliers a big winner. Using hospitality innovation, it is possible to bring your customers into your supply chain.

Real-time inventory monitoring and order based on customer’s requests will ensure minimum wastage.

According to a blog post by Oracle, today’s supply chain is all about the customer and their experiences. The supply chain of the hotel industry should have its customer at its core just as the below image suggests. 

 

 

Customer experience and expectation just be integrated into the hotel industry supply chain. 

Speed, quality and precision are key to customer satisfaction. Using artificial intelligence and machine learning in hotel industry, a lot can be automated in its supply chain.

All for the benefit of the customer. 

Now moving on to the challenges.

 

Challenges in Supply Chain Management in the Hotel Industry

 

As mentioned above, with best practices and suggestions come a lot of challenges as well.

The hotel industry is an extremely diverse industry due to which the suppliers range from local to international and are in big numbers.

Here are the key challenges in supply chain management within the hotel industry. 

  • Variable demand of the hotel industry is a key challenge as it makes it difficult to have a uniformity in the SCM processes. Cancellations and external factors add to the trouble.
  • Product lifecycle traceability is a key challenge leading to additional wastage.
  • New competition and emerging markets can disrupt existing supply chain leading to new players.
  • Automation is a boon and a challenge as well as it is adding new players in the supply chain while dislodging a lot of others leading to a continuously evolving ecosystem of logistics and supply chain. 
  • 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.
  • Transportation and other logistics constraints can always pose a challenge to the hotel industry. 
  • Creation of new demands from customers due to innovation and changing service patterns.
  • Lack of training regarding logistics and supply chain within the hotel industry.

 

There are multiple other challenges in the hotel industry but most of these can be negotiated through a proper supply chain strategy and through utilising best practices of supply chain management for the hotel industry.