strategic supply chain and the management of suppliers

Daniel PfylLecturer in Hospitality Management

Otago Polytechnic, Dunedindanielp@tekotago.ac.nz

Worked in the hotel, restaurant and food service industry for over 33 years.

Started my chef’s apprenticeship in Pontresina, near St. Moritz in the Swiss Alps.

Worked my as a commis chef through some of the best hotels in Switzerland.

In between all that I completed a one year compulsory army service and ended up head chef.

Started work & travel overseas.

Came to New Zealand as chef de partie with the THC Hotel Group, then Government owned.

Australia with Hilton in Adelaide and Mount Buller, a ski resort above Melbourne.

Grand Hotel National in Luzern and then at the Beau Rivage Palace Hotel in Lausanne, the French speaking part of Switzerland.

Sheraton Alice Springs, first time in a sous chef position.

Hyatt Borneo Management Services in Brunei where I was the Executive Chef to His Majesty the Sultan of Brunei.

From there I transferred with Hyatt to India as Executive Chef to the Hyatt Regency in New Delhi - talk about contrast!

Back to New Zealand, the George Hotel in Christchurch.

And finally Queenstown where he worked at the Holiday Inn again as Executive Chef, which later became the Novotel Queenstown.

Then F&B Manager responsible for the opening of the Grand Mercure Hotel St. Moritz.

10 years ago educating and teaching, skills to chefs and now managers of the future.

Culinary Exchange between China and New Zealand for Trainers in the Hospitality Industry travelling through China delivering practical workshops for 3 weeks in 2002.

Back in Switzerland for a Bakery/Patisserie “Workplace Experience” for 10 days in 2003.

And in 2006 for 8 weeks at the Grand Hotels SPA Resort in Bad Ragaz, near my hometown also in Switzerland.

Why has purchasing become strategic? What is strategic supply management? The theory behind the strategic focus to

purchasing. F&B Control and Manager’s Responsibilities. Management of suppliers, what does this

entail? What are some of the problems you might

face when trying to develop your department from clerical to a strategically focused one?

Customer demands Market trends Technology Globalisation Increase in 'world-class' competition Sustainability – environmental awareness Laws and regulations Franchising/Mergers

Businesses need to improve their management practices to stay competitive.

Successful businesses are able to satisfy customers’ needs with high quality products and services at reasonable cost.

Insufficiencies can no longer be passed on to the customers in the form of increased prices.

A strategic supply will sustain the competitive position and ensure consistent quality.

Companies take the holistic view of the entire supply process.

Promotes sound decision making for the use of resources.

Contributes to bottom line.

Traditionally purchasing has long been thought of as being responsible for the management of a firm’s inputs, i.e. raw materials and services into a organisation.

Value Creation

Purchasing is the acquisition of inputs into the firm. Strategic supply is the management of inputs and the transformation process, which includes the structuring of the supply activity of the firm.

Value Creation

Structured strategic supply management approaches are designed to give the firm a competitive position.

Competitive advantage, therefore, is derived from the value that a business creates for its customers.

The competitive advantage from a newstrategic focus to purchasing comes from: improved responsiveness and flexibility for

customers. improved efficiency and reduced supply

costs. and win-win strategies involving

collaboration rather than competition. Reduction of risk.

Introduction to F&B ControlCOMMUNICATION

The Food & Beverage System

MENU PLANNING

FORECASTING

PURCHASING

RECEIPT &STORAGE

ISSUES

SERVICE

ACCOUNTABILITY

MANAGER’SRESPONSIBILITY

PRODUCTION

GOAL SETTING PLAN A AND IMPLEMENT

EVALUATE ANDCOMPARE WITHPLAN

TAKE CORRECTIVE ACTION

ACHIEVE GOAL

CONTROL

CONTROL

OPERATIONAL

OPERATIONAL

PLANNIG

PLANNIG

FinancialPolicy

FinancialPolicy

CateringPolicy

(Menu Policy)

CateringPolicy

(Menu Policy)

Marketing Policy

Marketing Policy

Management control after the event

Management control after the event

Purchasing

Receiving

Storing and Issuing

Preparing

Selling

Purchasing

Receiving

Storing and Issuing

Preparing

Selling

Day to day controlby supervisorsand departmentalheads

Day to day controlby F & B Controldepartment

ForecastingForecasting

Set byseniormanagement

Discussion;What makes a good supplier?

Food borne-illness incidents, regardless of the cause, have an impact on the reputation of the caterers and suppliers business.

Discussion;How do you check and control quality of

goodsand services?

Clear specifications (High expectation = High performance).

Win-Win philosophy, both in negotiations and contracts.

Collaboration rather than competition. Use of par-stock levels and shared

information. Tendency to move towards fewer suppliers,

build relationships. Just in Time Purchasing (JIT), less capital

tied up in stocks.

Inventory turnover, average of approx 20 times per year for food. 8.5 times for beverages.

% of sales volume, food, non-food and beverage products in inventory that are equal in dollar amount to no more than 1% of its annual sales volume.

Rule of thumb, inventory should not be more than approx one-third of the average monthly product costs.

Maximum par stock 11 cases Minimum par stock 2 cases Lead time next day delivery Order day Tuesday Usage rate one case per day Function request 5 cases for

tomorrow nightYour order would be; 11-1(stock in hand on day of delivery) + 5

(for function that night) = 15 to order.

Shed old habits and build a new mind set. Continued existence of the “opportunist

approach”, seeing short-term price cuts against long term cost reduction. This traditional model of price driven procurement is hard to change.

Staffing skill levels lacking e.g. technology, development of supply strategy

A great many purchasing functions have little perception of the overall corporate strategy.

Getting top management on board to see the purchasing function as strategic.

Evaluation of performance

Training Incentives Rewards Progression Win-Win

relationship

MOTIVATIONMOTIVATION

TV ON

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Yes – things do go better with a plan Need to figure out what/when/how and

the associated resources you will need

Strategic Plans are management tools for success and important for communication with other parties (eg staff and suppliers)

Things can go horribly wrong without a plan…

30

Napoleon’s march on Moscow

Charles Minard 1861

31

Everyone would have worn a vest, jumper, coat, scarf, gloves... no arguments!

She would have asked questions: research She would have made a long list: planning Welfare of those involved would have

informed her decision making: team-building

Explained to everyone why they needed winter clothes: communication & leadership

Strategic supply management can be complex and demanding.

Establishing and maintaining relationships with supply chain participants is the most challenging aspect.

Managers must work hard to build trust and inevitably, resolve conflict.

Adopt a leadership approach and develop supply strategies that are directly related to their overall business objectives.

These supply strategies must go beyond the narrow focus of cost reduction to managing the supply chain network to increase their competitiveness in many other ways.

ReferenceNRAEF Manage First (2007). Inventory andPurchasing. Pearson Prentice Hall.

Eastham, J. Sharples, L. & Ball, S. (2001) FoodSupply Chain Management. ButterworthHeinemann

The theory behind the strategic focus to purchasing.