Purchasing as Part of Supply Chain Management

Purchasing in Hospitality Industry

Inventory management aims to include a suitable operating inventory, that is, the
number of ingredients that is expected to be acquired when you purchase the
component again, plus a minimum safety inventory, with the additional quantity that is
intended to be retained to satisfy greater demand than expected. And when distribution
happens regularly, demand for a particular menu item will significantly fluctuate between
shipments. When this happens, goods may run out with too little stock and therefore
could affect guest satisfaction negatively. Too many inventories can lead to unnecessary
waste, pilfering, and spoilage.

Purchasing as Part of Supply Chain Management

Most hospitality students interpret the word "purchasing" to mean paying for an
object or service. This conveys a much too limited context since it struggles to express
the full breadth of the purchasing function. Perhaps the words "selection" and
"procurement" are more appropriate. The term "selection" refers to the act of choosing
from among different alternatives at various stages. A customer, for example, may
choose between many different beef products, a specific grade of beef, a specific beef
provider, and a fresh or frozen beef commodity. A single customer will not be willing to
complete all of these tasks and make all of these decisions at the same time. However,
he or she mày be interested in the bulk of them at any stage. In contrast to "selection,"
"procurement" can be characterized as an ordered, formal transaction between a seller
and a buyer. It is the method of acquiring goods and services, which includes all tasks
related to deciding the types of items required, making orders, accepting and storing
packages, and executing purchasing contracts.

Determining Inventory Levels

A number of variables influence inventory levels. Some of the most important are
listed as follows:
1. Storage Capacity

Inventory goods must be obtained in appropriate quantities to be safely

packaged and stored. Frequently, the hospitality manager would not have enough
storage space. This could necessitate more regular delivery and keeping fewer of each
commodity on hand than would otherwise be desirable. As storage capacity is small,
certain managers have a propensity to fill it. This cannot be achieved because
increased inventory contributes to increased spoilage and failure due to robbery.
Furthermore, getting a huge amount of things on the shelves gives the impression to
staff that there is "plenty" of all. As a consequence, useful and costly goods can be used
carelessly. This not only makes it harder to locate products easily, but also raises the
probability that carryovers (items created but not sold) will be "lost" in the storage
phase.

2. Item Perishability for Food Items

If all food items have the same shelf life, that is, the length of time a food
commodity keeps its optimum freshness, taste, and consistency when in stock,
calculating the quantity of each item you can have on hand will be easier. Unfortunately,
the shelf life of food items differs significantly.

3. Supplier Delivery Schedule

Sellers will quickly remind you of the shipping schedule to a specific region or
place. A hospitality manager must use this knowledge to make informed choices about
the amounts of the goods of that vendor you have to procure for work and protection.

4. Potential Savings from Increased Purchase Size

Customers can learn that buying required products in bulk will result in
considerable savings. This makes sense as the overall gains exceed the additional
expenses of receiving and handling the greater amount. Reduced packing and delivery
prices, on the other hand, result in lower per-unit costs as bigger containers, bottles, or
cartons are ordered. Keep in mind that there are costs involved with very big
acquisitions. Storage prices, spoilage, decay, pest or rodent infestation, and burglary
are examples of these. As a general rule, assess the target commodity inventory levels
and then keep the stocks within the need range. Only when the benefits of making an
extremely large order are apparent should such a transaction be made.
5. Operating Calendar

When an operation is engaged in catering seven days a week to a reasonably

constant amount of guests, the operational calendar has no bearing on inventory level
decision-making. If, on the other hand, the service begins on Monday and ends on
Friday for two days, the operational calendar plays a significant role in deciding target
inventory levels. In general, an operator that is shutting down for a weekend (as in
school food service or corporate dining) or for a season (as in the management of a
summer camp or seasonal hotel) should aim to minimize total inventory amounts as the
closing date approaches.

6. Relative Importance of Stock Outages

Many food service operations do not care whether they do not have enough of a
particular food product or menu item. In other activities, even a single menu item
shortage may spell catastrophe. An error in the inventory amount of a minor ingredient
that triggers an outage may also be fixed with a fast ride to the grocery store for the tiny
operator. For a larger venue, such an outage may result in a major loss of revenue or
guest goodwill. If the operator is big or tiny, running out of a main ingredient or menu
component can be prevented, and carefully arranging inventory levels helps prevent it.
The required inventory amount is calculated by a clear understanding and experience of
how important this outage aspect is.

Organization and Administration of Purchasing

Buyers must schedule, coordinate, and manage their buying practices, both
full-time and part-time. This theory is critical for large transactions, especially chain
companies that are engaged in buying by more than one individual. However, small
businesses cannot afford to shop casually; even a part-time customer has a clear action
plan.

1. Planning

Buyers must consider the priorities and aims of the buying function in the early
stages of the development of a selection and acquisition strategy that is compatible with
the general thrust of the hospitality service. Thus, the analysis and final selection of
alternative solutions to reach the targets is the most important achievement of the
planning phase. To achieve this aim then, the overall purchasing strategy must be
tailored: only those providers with a more desirable distribution schedule may be
selected by the operator and a little extra is paid for this provider operation, if necessary.
Decisions taken at the start of preparation set the standard for potential operations.
Purchase planning should not take place in a vacuum. It is part of the hospitality
organization's strategic strategy and cannot function separately from its overall targets.
In addition, without obtaining information from other business staff, a customer seldom
decides the purchasing schedule.

2. Organizing

After developing a general strategy, a buyer must coordinate the human and
material capital required to carry it out. However, at this point, the buyer's voice may still
be only one of many. A hospitality company's purchasing operations may be structured
in a variety of ways. However, in general, we only see two main operational patterns:
one for individual operators and one for multi unit chain operations. The majority of
other organizational trends are variants of these two.

3. Staffing

Normally, neither small- nor medium-sized companies recruit full-time buying

workers. Several buyers, each with a specialty in one or two product areas, can be hired
for big transactions, particularly chains. These activities are often ideally tailored to the
full-time employee secretariat and the workers of the procurement service. These
workers obey the standard format of their work description. It is divided into three broad
scientific, intellectual, and human areas of competence. Professional expertise and vast
knowledge are very relevant in many roles related to the purchasing sector. The only
prerequisite for some jobs will be an ability to understand. The problematic aspect is
that the role of buying staff other than to buy, collect, shop, and issue should be taken
into consideration as the manager undertakes to establish general requirements.
Certain other duties can be granted preference.
4. Training

Purchasing staff from entry-level companies typically requires preparation that

includes work and business orientation, professional training, and on- the-job training
(OJT). Furthermore, educational classes and management workshops also accompany
internal training.

5. Budgeting

In operations requiring a full-time purchaser, the purchasing role will be expected

to cover the annual expenditures of service, such as the purchaser's salary and clerical
costs. User consumers never create a dedicated buying expenditure for activities.

6. Directing

In addition to their other duties, the buying staff entrusted to them must be
monitored by full- and part-time customers. Of course, the type of supervision is
personal. No two good managers tend to be practicing the same forms of supervision.
In general, however, a supervisory approach is determined by top management or an
owner-manager.

7. Controlling

Purchasers normally hold up the care of the goods they purchase before a
customer removes them from the warehouse and puts them into the manufacturing flow.
Everyone in the hospitality operation should be liable for managing pollution, waste
spoil, and fraud in the hospitality activity. Small operations use a "direct management"
scheme that maintains an eye on it from the owner-manager. A larger process requires
an "indirect control scheme," which is mostly used to allow someone, typically the
controller, to maintain data of all the items in a computerized or non computerized
overlapping system. The manager can decide where the supplies are in the hospitality
business and how many are located by looking at the controller's summaries of
problems and receipts. It is often a difficult challenge to track the buying phase of a big
business, but it is crucial to the survival of the company. Controlling and tracking the
procurement practices of the hospitality industry workers today help businesses with
multiregional properties.
Chapter Summary

Inventory management aims to include a suitable operating inventory, that is, the
number of ingredients that you expect to acquire when you purchase the component
again, plus a minimum safety inventory, with the additional quantity that you intend to
retain to satisfy greater demand than expected. In the inventory stage, the various
determinants include storage space, item perishability, supply schedule for suppliers,
future savings due to expanded buying scale, operational calendar, and the relative
value of stock exits.

Different forecasting techniques are being used as well in meeting the supply
needs and demands for the continuous operation of the business. These techniques are
naïve, moving average, exponential smoothing, linear regression, multiple regressions,
just-in- time, and par level.

The procurement goals are to ensure sufficient supply, minimize spending,

preserve efficiency, and preserve the competitive position of the firm.

Different procurement practices would be focused, on the other side, on when to

order, inventory levels control, quality requirements, specifications, competitive bid,
sellers' inquiries, financial conditions control, supply tracking, refund negotiation,
administrative changes, warehouse arrangements, acceptance of the purchase source,
brand names accepted, supplier evaluation, and negotiations.

Organization and administration of purchasing are composed of planning,

organizing, staffing, training, budgeting, directing, and controlling.