Unit 2

INTRODUCTION

The concept of supply chain management or SCM is the management of the flow of

products and services. SCM involves the movement and storage of raw materials,

work-in-process inventory, and of finished products from their origin to consumption.The supply

chain is the whole process of making and selling commercial products. It includes every
stage,from the supply of raw materials to delivering the product to the ultimate consumer.

‘Suppliers’ or ‘vendors’ play a vital role in supply chain management. The terms mean
entities that provide goods or services to individuals or companies.Suppliers may, for
example,manufacture inventoriable items and subsequently sell them to customers.Let’s imagine
a furniture maker of ABC Hotel. Some of the suppliers could be a timber company, electricity
company, and toolmaker. They supply the furniture maker with wood, electricity, and tools for
making furniture.

On the other hand,it is important that suppliers file be accurately maintained to

ensure,efficiency,effectiveness,team work,profitability,enhanced customer service.

In this unit, you will have an overview and a background of the suppliers’ file, role of
suppliers, negotiation process and procurement process in supply chain management. The unit
will entail 18 hours that includes the following topics:
A. Suppliers File
B. Role of Supplier
C. Negotiation Process of Suppliers
D. Procurement Process of Suppliers

You will gain knowledge on the suppliers file, role of supplier selection, development and
management in establishing high-performing supply chains.

LEARNING OUTCOMES

At the end of this unit, the students will be able to:

1. Understand the supplier’s file

2. Understand the role of suppliers
 3. Examine the negotiation process of suppliers in supply chain management
4. Examine the procurement process of suppliers in supply chain management

LET’S START

Do this activity!

1. In the space below define supplier based on the following diagram:

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TOPIC 1: SUPPLIER FILE

This topic (for 4 hours) focuses on the supplier files.

LEARNING OBJECTIVES

At the end of this lesson, you will be able to:

 a. understand the supplier’s file
b. examine the role of supplier file in supply chain management
c. point out the importance of supplier file in supply chain management to the hospitality
industry;

LET’S LEARN

SUPPLIER FILE

The supplier master file is a central, comprehensive file that holds information about
suppliers; including method of payment, bank account details and contact details. To ensure
payments are correctly made, this information needs to be valid and complete.The Supplier File
contains information on the suppliers (vendors) that you buy from.The Supplier File is one of the
“primary” master file that many of the fields on Purchase Orders and other documents will
default based on the selected supplier (e.g. the supplier's address, Terms of Payment, etc.). You
can also track purchase history and otherwise sort, filter and search for information by Supplier
Code.
What are the Supplier Data?
The Supplier data is generally a paper or digital document containing every information
related to a supplier such as:
 contact person
 location
 location range of products
 legal form of company
 different collected certificates
Folder Contents of the Folder
GENERAL •Address and other contact information that will carry forward to POs and
other documents.

MISCELLANEO •Other default information that will carry forward to POs and other
US documents.

ACCOUNTS •Alternate Supplier Code, Remit-to Address and other settings for use with
PAYABLE the Invoice Approval Module.

CORPORATE •Miscellaneous statistics and company information for reference purposes.

CLASSIFICATIO •Classification (categories) for the supplier, for use when searching and
NS filtering reports.

PUNCHOUT •URL and other information used when integrating with the supplier’s web-
based order entry system (e-commerce site).

PORTAL •Users who can access the Supplier Portal.

While fields will default on POs and other documents based on the selected supplier to
save time, many fields can be changed on a document-by-document basis.In the Supplier File,
you can also maintain internal notes for each supplier (e.g. conversations, important details, etc.)
and you can indicate how each supplier wants to receive their orders by default (i.e. hard copy,
by fax, by e-mail, etc.).

General Folder

The GENERAL Folder contains address and other contact information for the supplier.
This information will be copied onto POs and other documents but can be modified on each
document if needed.  

Miscellaneous Folder

The MISCELLANEOUS Folder contains information that will be copied onto POs and
other documents but, for most fields, can be modified on each document if needed.    

Accounts Payable Folder

The ACCOUNTS PAYABLE Folder contains optional settings for this supplier, for use
when exporting transactions to your Accounting/financial/ERP or other systems   
Corporate Folder
The CORPORATE Folder contains miscellaneous statistics and company information
used for reference purposes only. These fields are all optional.

Classifications Folder

The CLASSIFICATIONS Folder lists classifications (categories) for the supplier, used

for sorting and filtering reports.

IMPORTANCE OF SUPPLIER FILE IN SUPPLY CHAIN MANAGEMENT

 Supplier File management is the key for a long lasting and effective strategic
administration of your supplies.

Criteria which can be used as basis for the administration of supplier data.

Integrity
 Data and information must always be complete in order to be used as a solid basis in
every process and by every involved person.

Up-to-date

1. Data and information must also always be up-to-date. Even if most of the master data has
a long lifecycle, it is important to make changes and update information as soon as
possible in order to avoid mistakes due to outdated data.

Accuracy and unity

 A standardized data collection supports you with the accuracy of your supplier’s data and
information. Using a central organisation with defined criteria for your data can simplify its input
in your system.

Access and transparency

 Every entitled person and department should have access to the supplier’s master data and
any time.

One of the most important questions you have to ask yourself is “where does this data or
information about my supplier come from?”. Indeed, within different cooperation stages with
your suppliers, different sources (more or less trustworthy) are often used along the supply chain.
Being in direct contact with suppliers during the supplier’s selection or the approval for buying
process, purchasing departments are generally the ones with the most up-to-date information.
LET’S PRACTICE

Who would you contact in identifying your suppliers?

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How would you make contact?

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LET’S ASSESS

Is the supplier master file operating to promote effective accounts payable processes, and reduce
the risk of fraud, duplicate payments and other errors? Discuss and site specific examples.

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TOPIC 2: Role of Suppliers in Supply Chain Management

 This topic (for 3hours) deals with the specific role of suppliers in supply chain management.

LEARNING OBJECTIVES

At the end of this lesson, you will be able to:

a. understand the role of suppliers

b. appreciate the importance of their roles

LET’S LEARN

When developing relationships with various suppliers it is important to understand the role they
perform in providing products and services to customers. This will help determine their
suitability in providing products and service.

Supplier roles include:

1. Selling destinations you need

2. Selling transport you require – air, car, rail, coach, cruise etc.
3. Selling accommodation style you require – hotel, motel, apartment,
resort etc.
4. Selling the appropriate level of comfort and inclusions your client
needs
5. Having competitive prices and offering value for money for your
client
6. Having a reputation for reliability, efficiency and easy payment
7. Provide quality documentation
8. Employ helpful and knowledgeable staff
9. Pay competitive agent commission
 10. Have local representation.

LET’S PRACTICE

What activities are performed in these points?

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How can you improve these individual’s roles?

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LET’S ASSESS

Provide personal experiences in selecting suppliers.

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Research work:

You are to conduct research and locate a tourism/hospitality agreement that may be used to
establish a relationship between an organisation and suppliers.

If you are unable to obtain an agreement, you are to identify five key points you would insert
into an agreement.
 TOPIC 3: NEGOTIATION PROCESS WITH SUPPLIERS

This topic (for 4 hours) focuses on the negotiation process between suppliers and the
players in the hospitality industry.

LEARNING OBJECTIVES

At the end of this lesson, you will be able to:

a. Discuss the importance of negotiation process

b. Design a supplier accreditation process that is applicable to a restaurant or hotel

LET’S LEARN

AN INTRODUCTION TO NEGOTIATING

Negotiating is the process that procurement professionals go through to create favorable

terms as part of a new supplier contract. This can involve negotiating different terms with an
existing supplier when a contract is renewed, or discussing terms from scratch with a brand new
vendor.

Negotiations are typically used to determine the fairest price and payment terms, delivery
and production time, quality standards and more. The negotiations need to consider the best
option for both supplier and buyer, rather than just aiming to get the cheapest possible price, as
this will help to build stronger relationships with long term suppliers.

To ensure everything you set out to achieve is covered in negations with suppliers, it is
important to set objectives prior to entering into negotiations.

Importance of Negotiation Process

Successful supply chain management is anchored on excellent commercial relationships

with critical suppliers. The benefits of close relationships include a focus on cost rather than
price, early supplier involvement on key commercial and technical aspects, improved supplier
performance in the areas of quality and on-time delivery and an abundance of communication.

While strong supplier relationships have been proven beneficial to the buyer and seller,
these relationships are not a replacement for active and ongoing negotiation. If one looks at
negotiation with the big picture in mind — ongoing give and take with trustworthy and high
performing suppliers — it can be an agreeable experience where both sides meet their objectives.

It is important to keep the relationship in perspective; a relationship with a supplier is not

an excuse for lack of due diligence. Buyers need to focus on negotiating and establishing the
performance framework early in a supplier relationship to allow for continuous improvement.
Approach negotiation with a holistic approach.

Supplier Accreditation Process

Supplier Accreditation is the process to assess potential new suppliers under

predetermined qualifications. This is to ensure that the new supplier/s is legally operating and
can meet the demands of the company in terms of cost, quality and reliability. The following
steps are being done during the process:

1. Purchasing department to send out the Supplier Accreditation info sheet to vendor
 2. Supplier need to comply and send back the accomplished form together with the list of
requirements.

3. New suppliers are required to submit the following:

Local supplier

a. Letter of Intent

b. Supplier Accreditation Info Sheet

c. Company Profile/List of Goods and Services

d. Proof of Tax/BIR Registration

e. DTI/SEC Registration
 f. Mayor’s Permit

g. Latest Audited Financial Statement (2 years and above in the business)

h. Proof of Billing (New Businesses)

i. Sample of Company Invoice

Foreign Supplier

a. Vendor Accreditation Form

b. Vendor System Registry

c. Company Profile/List of Goods and Services

d. Business Registration Certificate

e. Office Location Map Starting from the Airport

*A site visit is also being done when applicable to validate the information the supplier
provided and to have an initial assessment of management system, technical competence,
capacity and working environment.

3. Purchasing to review the completeness and assess documents conformity.

4. Purchasing to provide rating of the vendor based on the assessment.

5. Supply Chain Director to sign/approve the Supplier Accreditation Info Sheet

6. Purchasing to create and maintain vendor in the system. Finance maintenance to complete the
whole system set-up.

7. Purchasing to keep the file and renew accreditation on an annual basis.

LET’S PRACTICE
 Make a list!

1. Create a list and discuss the reasons why negotiation is important in supply chain and
management.
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LET’S ASSESS

1. Use the supplier accreditation process discussed in this topic as your guide, design a
supplier accreditation process that is applicable to a restaurant or hotel.

TOPIC 4: PROCUREMENT PROCESS

This topic (for 5 hours) focuses on the procurement process in hospitality industry
operations.

LEARNING OBJECTIVES

At the end of this lesson, you will be able to:

a. Discuss the procurement process

 b. Discuss market sourcing

LET’S LEARN

The major goal of the procurement process is to assure the availability of food and
supplies in the quantity and quality consistent with operational standards at the most favorable
price.

The purchasing process is an essential part of every food service operation. All competent
cooks should be skilled in buying the appropriate ingredients, in accurate amounts, at the right
time, and at the best price. Every kitchen operation has different purchasing procedures. But
there is one rule that should always be followed:

“Buy only as much as it is anticipated will be needed until the next delivery.”

This will ensure that foods stay fresh and will create a high inventory turnover. All foods
deteriorate in time, some more quickly than others. It is the job of the purchaser to ensure that
only those quantities that will be used immediately or in the near future are purchased.

The quality of the food and materials purchased is a major factor in determining the
quality of the menu served in any foodservice operation. Food items can be purchased in many
stages of preparation from raw to ready-to-serve. The food buyer must purchase the appropriate
market form to meet the menu requirements and operation’s quality standards.

Food and materials are a major expense in the restaurant or foodservice department’s
budget. To meet budgetary goals, a foodservice operation must have a well-organized purchasing
program that provides a complete supply of food items, in the amounts needed, at a fair price.

Purchasing is defined as the determination of needs and the placement of the orders with
suppliers. The purchasing process can be divided into two
activities: buying and ordering. Buying involves decisions regarding where to place orders on
the basis of quality, price, and service. Buying is a management function. Therefore, the
foodservice manager or director usually assumes responsibility for deciding on the suppliers
from which to purchase food and supplies. Ordering is the determination of the quality and
quantity of food and supplies required to satisfy menu requirements, at a price within budgetary
guidelines. Ordering is usually a supervisory function, and a foodservice supervisor is often
given responsibility for ordering. Ordering may also be done by a skilled employee such as an
experienced cook, especially in smaller operations. The individuals responsible for ordering must
be familiar with menu requirements; the quantities of food needed; market forms of food; grades
and standards; seasons for foods; the food marketing system; and reliable sources of market
information. In addition, a food buyer must have some knowledge and understanding of legal
responsibilities and ethical practices. Sound business principles and well-stated purchasing
policies are the foundation of a good purchasing program. Fairness, honesty, and trust between
the food buyer and the supplier are essential to a good working relationship.

The customer and the supplier depend on each other. The foodservice cannot operate
without the merchandise, and the supplier must have a market for his goods. Therefore, a
satisfactory “deal” is one that benefits both parties.

The customer, however, needs more than just the product offered by the supplier: (s)he
needs the supplier’s expertise and his/her reliable service. To ensure himself/herself the benefits
of the buyer/supplier relationship, the buyer should try to be a valued customer. Reliable vendors
will always try to protect their valued customers by extending them with the best possible
quality, price, and service.

Three Ways to Increase Your Value

A customer can increase his/her value to a supplier in at least three important ways.

1. He/she should place orders of a reasonable size.

Because delivery services cost money, most suppliers establish minimum size
requirements for orders. In other words, the order has to be big enough to make it worth the
supplier’s while to deliver. The buyer should learn what these minimum size requirements
are and try to stay above them. Of course, a good supplier will usually help out in an
emergency that requires a rush delivery or a small order, but don’t ask for these special
favors too often or you’ll end up paying for it.
 2. A customer should not place his/her orders too often.

In fact, spacing-out orders help assure that they are kept to acceptable sizes. Very
frequent or small orders indicate inexperience and poor planning on the part of a buyer.
Careful planning and accuracy in estimating needs are necessary to build a good relationship
with a supplier. If the foodservice operation is large enough, the supplier may be willing to
make frequent deliveries, but will usually pass added expenses on to the buyer as the price
for the buyer’s inefficiency. The acceptable frequency of delivery varies from place to place
and is determined principally by the accessibility of the goods and the distance the supplier
has to travel to make his deliveries. In large cities, for example, daily deliveries are common.
Nevertheless, if a buyer does a fairly small volume of business with a supplier, the buyer
should try to place orders only two or three times a week to minimize the supplier’s
expenses. In rural areas deliveries may be made only once or twice a month, so that it may be
necessary for the foodservice operation to maintain an inventory somewhat larger than would
normally be desirable. (It is, of course, economically advantageous to keep the inventory as
low as possible. Large inventories involve investment insurance, storage, and spoilage
expenses.)

3. A customer should not spread his/her business among too many suppliers.

The wise buyer will confine business to a limited number of suppliers who provide
acceptable service. This is not to say that the buyer should never order from other companies.
It does mean, however, that a few suppliers in each food category should receive the lion’s
share of the business. A buyer may occasionally order from other suppliers, especially if they
have something new or interesting to offer, but it is wise to check with the current supplier
first before looking elsewhere. “Cherry picking” should be avoided. This is a practice of
buying each item from whichever supplier has the lowest cost, no matter the size of the
overall order. In some smaller operations, the buyer may choose to use one supplier in each
food category; in most cases, it is wise to have more than one supplier.

Market Sourcing
Sources of supply vary considerably from location to location. Large cities have a greater
number and variety of suppliers than do small towns and isolated communities. Purchasers
should establish contact with available suppliers/vendors such as wholesalers, distributors, local
producers and packers, retailers, cooperative associations, as well as brokers, and food importers.
In most instances, the person in charge of buying will contact several suppliers to obtain the
necessary foods. Some wholesalers diversify their product lines in order to meet all food-related
kitchen needs. Food products are obtained from various sources of supply. For example, a
packing house supplies meat and meat products, while a food wholesaler supplies dry goods.
Once the business is established with a supplier, all transactions should be well documented and
kept readily available on file. There are two major food categories: perishables and non-
perishables

a. Perishables

Perishable items include fruits, vegetables, fresh fish and shellfish, fresh meats, poultry, and
dairy products. As a rule, perishables are bought frequently to ensure freshness. Frozen foods,
such as vegetables, fish and meat products, have a longer lifespan and can be ordered less
frequently and stored in a freezer.

b. Non-perishables

Non-perishable items include dry goods, flour, cereals, and miscellaneous items such as olives,
pickles, and other condiments. These can be ordered on a weekly or monthly basis.

Keep in mind that just because something does not go bad isn’t a reason to buy it in quantities
larger than you need. Every item in your inventory is equal to a dollar amount that you could be
saving or spending on something else. Consider that a case of 1000 sheets of parchment paper
may cost Php25000. If you have a case and a half sitting in your inventory, but only use a few
sheets a day, that is a lot of money sitting in your storeroom.

LET’S PRACTICE

Explain and Expound

1. Explain and expound the rule in purchasing which is:

“Buy only as much as it is anticipated will be needed until the next delivery.”

LET’S ASSESS

Design and Discuss

1. Draw diagram to illustrate the procurement process of a restaurant or hotel and discuss.

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