How to implement supply chain management in the hotel industry

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GodfreyOtiato_100.jpgDifferent concepts have been developed to understand how to successfully implement logistics and supply chain management. "In the case of the hotel industry, logistics and supply chain activities must be grouped into tactical, strategic and operational levels", says Godfrey Otiato (MCILT). Taking this view helps to create a more systematic approach by focusing on how implementation will happen from a higher level, then linking this to long-term goals and, finally, seeing how these results will translate in the short-term.

Otiato, founder of Guru Logistics Consultancy, unpacks these logistics and supply chain activity levels in this month's SmartProcurement.

1. Tactical level

- Executive support:
The tactical level of logistics and supply chain management implementation focuses on the steps that are taken at a higher level to ensure successful implementation. It is important that, during the tactical stage of implementation, there is 100% executive support and buy-in from senior managers as well as to have the right people in place who understand the value that logistics and supply chain implementation will bring to their properties. Managers will need to take the lead when it comes to communication and must ensure that all employees understand why initiatives are essential to the company's business strategy.

- Visibility and control:
It is important to have visibility and control when implementing logistics and supply chain practices as these will assist with decision-making. The hotel environment has seen an increase in the need for visibility and control to help understand the decisions made by vendors and suppliers to, in turn, help managers to make well-informed logistics and supply chain decisions. Visibility and control enable hotel managers to make important decisions on costs in the areas of transportation and shipping.

- Benchmarking:
The goal of benchmarking during logistics and supply chain management implementation is to enhance design and operational effectiveness. It is important for hotel managers to measure set targets against results in the different areas of the operation, such as order filling, transportation and vendor compliance. Hotels can use information obtained from benchmarking to improve processes and make better decisions.

- Creative solutions and risk taking:
The goal of developing creative solutions and a willingness to take risk during logistics and supply chain management implementation is important since a lot of emphasis has been placed on reducing costs and increasing margins wherever possible. Creative solutions and a willingness to take risks help the focus to fall on negotiating better costs and satisfying customer demand.

2. Strategic level

- Change management:
The strategic level of logistics and supply chain management implementation is linked to long-term benefits over a period of time. Change management plays a big role in logistics and supply chain management implementation in different areas, from making changes to the whole process to fixing vendor issues. Taking into account the fast pace of the hotel industry during implementation, it is important for managers to think and act in real time to enable innovation and change.

- Think lean and green:
Even though lean started in the automotive industry, it can be used in any business process, including the hotel industry. Hotel managers need to use lean strategies immediately, instead of later, when implementing logistics and supply chain management. Since lean is focused on the end-user, the main focus during implementation will be to maintain profitability, save money and add value that fulfils customer needs. During a lean implementation phase, it is important for managers to identify the service value stream that is focused on design layout, development, procurement and distribution process strategies.

- Top talent and accountability:
When implementing logistics and supply chain management in any company, it is important to be able to sustain the implementation, which involves building a solid foundation that includes top managers to drive the process with deep expertise in business skills as well as logistics and supply chain functions.

- The right information technology:
Information technology has become an important and integral part of every business process. When implementing logistics and supply chain management in the hotel industry, it is vital to be able to make most company decisions at the speed of light. With the help of the right information technology, hotels can communicate supply chain and demand change information easily in the areas of inventory, distribution, transportation and logistics management. Owing to the accurate information that is produced by analytical and visibility capabilities, it can be ensured that efficient business decisions can be made quickly.

3. Operational level

- Costs:
The operational level of logistics and supply chain management implementation focuses on decisions that are related to how to make the tactical approach happen in the short-term. Today, hotel costs associated with logistics and supply chain strategies place the emphasis on increasing efficiency and reducing total costs in order to stay competitive (IBM, 2009). During implementation, costs need to focus on purchasing and inventory. It is important to monitor purchasing costs in terms of products that have a short lifecycle and thus have to be replenished frequently, as hotels usually buy too many stock-keeping units for the same use.

- Simplifying complexities:
It is important when implementing logistics and supply chain management that hotel managers manage strategies that eliminate complexities that do not add any value to the organisation. It is also imperative that logistics and supply chain functions are broken down into different areas, based on which areas matter the most in the supply chain. This segmentation will help hotel managers to easily identify the relationship between costs and price with suppliers as well as when negotiating better prices.

- The right metrics:
Applying key performance indicators (KPIs) to logistics and supply chain operations during implementation is vital to monitor how well suppliers and vendors are meeting set targets, which, in turn, improve top and bottom line performance. Starbucks created a weekly scorecard to monitor third-party carrier performance in the areas of cost, service and productivity (as agreed upon with their partners). Applying KPIs to operations create transparency, improve costs and help serve customers better as well as lay the foundation for future logistics and supply chain initiatives.

- Risk management:
Considering risk management is critical for hotel managers during logistics and supply chain management implementation as it evaluates the risks associated with strategy implementation. Managers must have a clear understanding of the benefits of sharing risk information across their network.

To conclude, the goal of grouping logistics and supply chain activities into tactical, strategic and operational levels, as described above, is to create an approach that focuses on high-level implementation that is linked to long-term goals, the results of which can be translated into the short-term.

You can get in touch with Godfrey Otiato on LinkedIn or by emailing him at godfreyzennith@yahoo.com.

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