HOSPM 3105

Supply Chain Management in Hospitality

Name:________________________ Section__________________Score:_______

Module 5. Worksheet # 1

After watching the supplemental videos on Procurement Process, Procurement Vs. Purchasing and
Transportation in Supply Chain Management, please answer the following items:

What is Procurement?

Procurement is defined as the process of acquiring goods or services from a third-party

vendor through direct purchasing, competitive bidding or tendering process while ensuring
the right quality and quantity. It is commonly associated with businesses, because companies
need to solicit services or purchase goods usually on a relatively large scale.

What is transportation?

Transportation refers to the movement of product from one location to another as it makes
its way from the beginning of the supply chain to the customers.

What is the difference between the 3 types of procurement? Provide each example in the
Hospitality and Tourism Industry.
Direct Procurement Indirect Procurement Service Procurement

Purchase of the input that a Procurement of the services Procuring and managing
business requires in order to or inputs that are not directly contingent workforce
manufacture its end product. This used in manufacturing but are and consulting services.
is the raw material that is essential for day-to-day
required usually for a operations. Examples: Professional
manufacturing-related business. services, software
Examples: Office supplies, subscriptions, etc.
Examples: Raw materials, facility management, travel,
machinery, etc. maintenance service, etc.

What are the 7 activities involving in procurement?

1. Identification of needs
2. Sourcing
3. Selection
4. Negotiation
 5. Ordering
6. Receiving
7. Payments
What is procurement process?

The procurement process refers to the identification and implementation of certain steps to
ensure that they can acquire goods and services to meet their requirements and achieve their
objectives. The procurement process differs between businesses because it varies according
to a company’s needs. Every organization has a unique procurement process flow.

Identify the steps involved in procurement and discuss each steps.

Step 1.

Identification of Requirement – The first step in buying something is recognizing that there is
a need for it. It is a step that should be discussed between stakeholders and consultants to
prevent issues later on in procurement process.

Step 2.

Determination of the Specifics of the Requirement – When it has been identified that there is
a need, the exact specifics of the product or service that is required is to be decided upon,
including technical specification or part numbers.

Step 3.

Sourcing – Once it is determined that a specific item or service is to be bought, the

procurement team has to do the research to determine the various sources that supply it. For
repeat orders, there would usually be a pre-existing vendor list. For new items, suppliers must
be thoroughly investigated to determine their reputation, speed, quality, reliability and prices.

Step 4.

Negotiation and Finalization of Price and Terms – For direct purchases, requests for quotes
will be sent to the shortlisted vendors. The usual practice is to get a minimum of at least three
quotes before making a selection. The company to procure from will be selected not only on
price but also based on their promptness, reliability, and quality.

Step 5.

Purchase Requisition and Order – A purchase requisition within a company will be approved
by the appropriate authority. This will then lead to a generation of purchase order with all the
specifics of the order as well as the terms and conditions.

Step 6.

Delivery of the Purchase order – The shipment notice is sent to the buyer wherever
applicable. The delivery of the purchase order depends on the practices of the buyer and the
seller. It can be in person or by email. This is also as per the specifications agreed upon by
both the buyer and the seller.

Step 7.

Expediting – This involves creating the timeline for the prompt delivery of the requested
goods or services after factoring in any unforeseen delays. It may also include information on
payments as well as delivery schedules.

Step 8.

Receive and Inspection – When the product or service is ready, it is supplied to the buyer. It is
the responsibility of the buyer to thoroughly inspect the supplied items if they match the
agreed-upon purchase order. The buyer can either approve or reject it

Step 9.

Payment Process – If the buyer takes delivery of the item, it is implied that they are accepted
and the payment process starts. For the payment to be made, the documents relating to the
order are studied. If there are any mismatches, they have to resolve them before payment.
Once payment is approved, it is made as per the agreed-upon modes of payment.

Step 10.

Record Keeping and Review – Both the companies, buyer, and seller maintain their records for
their auditing and taxation processes. The entire process should be under continual review in
order to improve as well as settle any disputes that might have arisen.

Differentiate Procurement and Purchasing

Procurement
1. Procurement is the process of acquiring
goods or services from a third-party vendor
through direct purchasing, competitive
bidding or tendering process while ensuring
the right quality and quantity.
Purchasing
Purchasing is the set of functions associated
with acquiring goods or services. It is a small
subset of the broader procurement function.

2. End Goal – identify the company’s needs End Goal – to arrange company expenditure,
and fulfil the procurement of those needs. and buy goods and services for the company.

3. It is a strategic and proactive process. It is a reactive process.

4. Item’s value is more important than how It is more focused on price than value.
much it costs.

5. Involved end-to-end activities that are It gets involved when it’s time to buy goods
needed to acquire all necessary goods and and services. Tasks involved are; ordering,
service, like; need recognition, sourcing, expediting and payment.
contract closure and record keeping.

6. Focused on developing long-term and a Focused on making efficient transactions and

win-win relationship with suppliers not overly concerned with developing vendor
relations.

What are the economic regulations in transportation?

 They govern the entry of a new firm

 Exit from transportation business
 Rules of freight rate

What are non-economic regulations in transportation?

 Public safety
 Environmental issue by mandating seat belt usage
 Prohibiting smoking on airplanes

What is Carrier Management?

 Set appropriate prices for transportation services

 Meet the customer’s service needs

What are the Carrier Management decisions?

1. Selection
2. Marketing
3. Capacity planning
4. Network design
5. Pricing
6. Financing

What is surface transportation?

Surface transportation is the movement of people by road, train, or ship rather than by plane.

What are the challenges of truck industry?

1. Labor issues
2. SKU proliferation
3. Rising energy cost
4. Load planning
5. Uneven order volume
6. Dynamic pricing