[MCC5412] FOOD SUPPLY CHAIN MANAGEMENT

LECTURE 1:INTRODUCTION TO FOOD SUPPLY CHAIN MANAGEMENT

LECTURE LEARNING OUTCOMES

◾ Upon completing this lecture,you should be able to:

◾ understand the evolution of contemporary competitive environment

◾ descry the importance of supply chain management to catering business

◾ define the key terms of food purchasing & supply chain management

◾ identify the scope of food chain management

◾ explain the concept of supply chain umbrella

◾ depict the development of the purchasing management from the past to present

◾ discuss the supply chain challenges confronting the food & beverage industry

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A NEW COMPETITIVE ENVIRONMENT

What was the worse

purchase experience
that you had
encountered in the past?
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A NEW COMPETITIVE ENVIRONMENT

◾ Evolution of competitive environment:

◾ 60’s/70’s
◾ Companies began develop marketing strategies for capturing loyalty

◾ Strong engineering, design, & manufacturing functions were needed to support market requirements

◾ Customers needs translated into products

◾ Need for high level quality at a reasonable cost

◾ N eed for flexibility and responsiveness

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A NEW COMPETITIVE ENVIRONMENT

◾ Evolution of competitive environment:

◾ 80’s
◾ N eed for flexibility and responsiveness

◾ 90’s
◾ Organizations realized materials & service inputs from suppliers impacted ability to meet customer needs

◾ Resulted in increased focus on supply base & purchasing

◾ Customer demand:Not only right products, but also at the right time,cost,place, condition,and quantity

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WHY PURCHASING & SUPPLY CHAIN MANAGEMENT IS IMPORTANT?

◾ In average,firms spend 55% of their revenues on purchasing goods and services

Purchased goods & services as a percentage of cost of goods sold (COGS) (VanWeele, 2018)
WHY PURCHASING & SUPPLY CHAIN MANAGEMENT IS IMPORTANT?

◾ In order to improve performance & competitiveness, many companies are turning their attention from internal
activities to external ones – purchasing and supply management
◾ Results of Good Supply C hain Management:
◾ Outsourcing: Companies can concentrate on their areas of specialization or competence

◾ Potential for Profitability:

◾ Improved quality & cost performance

◾ Improved product design & development time

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WHY PURCHASING & SUPPLY CHAIN MANAGEMENT IS IMPORTANT?
1.Cost Efficiency: Good purchasing and supply chain practices help hospitality businesses save money. By getting
better prices from suppliers and organizing their buying process, hotels and restaurants can reduce costs and
make more profit.

2.Quality Control: In hospitality, it's important to maintain consistent quality. Purchasing and supply chain
management help businesses find reliable suppliers who provide high-quality products and services. This ensures
that guests are always served with top-notch ingredients and items.

3.Timely Delivery: Getting things on time is vital in hospitality. Effective supply chain management ensures that
hotels and restaurants receive their deliveries promptly. This keeps their operations running smoothly and
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prevents any disruptions to guest services.
WHY PURCHASING & SUPPLY CHAIN MANAGEMENT IS IMPORTANT?

4. Menu Variety and Innovation: Purchasing and supply chain management contribute to creating exciting
menus in hospitality. By sourcing a wide range of ingredients and products, businesses can offer unique and
interesting menu options. This attracts guests who are looking for new and delicious dining experiences.
5. Sustainability and Ethics: Being responsible and ethical is important in the hospitality industry. Purchasing and
supply chain management help businesses support sustainability and ethical practices. This means sourcing
from suppliers who prioritize the environment and treat workers fairly.
6. Risk Management: Purchasing and supply chain management help businesses handle risks related to their
supply chain. By working with different suppliers, having backup plans, and communicating effectively,
businesses can minimize the impact of any unexpected events. This ensures that their operations continue 9

smoothly, even in challenging situations.

WHY PURCHASING & SUPPLY CHAIN MANAGEMENT IS IMPORTANT?

To conclude:
Purchasing and supply chain management play a vital role in the success of hospitality businesses.
They encompass various critical aspects that contribute to the overall guest experience.
1. Effective purchasing and supply chain management practices save money by optimizing
procurement processes, negotiating favorable prices with suppliers, and leveraging economies of
scale. This cost efficiency directly impacts the bottom line and allows businesses to allocate
resources effectively.

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2. Ensuring quality is important in the hospitality industry.
WHY PURCHASING & SUPPLY CHAIN MANAGEMENT IS IMPORTANT?

3. Timely deliveries are crucial to maintaining seamless operations in hospitality. With efficient supply chain
management, businesses can ensure that essential items, such as linens, toiletries, and food supplies, are
consistently available when needed. This prevents disruptions and allows for smooth service delivery to
guests..
4. Diverse menus are a hallmark of a vibrant hospitality establishment. By engaging in strategic sourcing and
supply chain management, businesses can access a variety of ingredients and products. This enables them to
create innovative and enticing menu options that cater to different tastes and preferences, enhancing the
overall dining experience for guests.
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WHY PURCHASING & SUPPLY CHAIN MANAGEMENT IS IMPORTANT?

5. Sustainability is increasingly valued by consumers, and the hospitality industry is no exception. By prioritizing
sustainability in purchasing and supply chain decisions, businesses can support eco-friendly practices, reduce
their environmental footprint, and appeal to environmentally conscious guests.
6. Effective supply chain management helps businesses manage risks associated with potential
disruptions. By diversifying suppliers, implementing contingency plans, and maintaining open
communication, businesses can mitigate the impact of unforeseen events, ensuring consistent
operations and guest satisfaction.

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Definitions of KeyTerms

◾ Purchasing (also known as procurement)

◾ Supply Management (strategic sourcing)
◾ Supply C hain
◾ Supply C hain Management (supply chain orientation)
◾ Value Chain
◾ Value Chain Integration
◾ Logistics

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WHAT IS PURCHASING?

◾ Purchasing is a functional group/department/activity that supplies the organization with materials

◾ It is often referred to as procurement
◾ Focuses on cost when purchasing materials
◾ Arm’s-length (i.e.,short-term & adversarial) relationships between buyers & suppliers
◾ Example activities of purchasing include:
◾ Supplier identification & selection

◾ Negotiation & contracting

◾ Buying

◾ Supply market research

◾ Supplier measurement & improvement

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WHAT IS PURCHASING?

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The linear procurement process model & some related concepts (Van Weele, 2018)
WHAT IS FOOD SUPPLY CHAIN MODEL?

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WHAT IS FOOD SUPPLY CHAIN MODEL?

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WHAT IS SUPPLY MANAGEMENT?

◾ Supply Management is a progressive approach to managing supply base (i.e.,the suppliers) & the supply chain
◾ A broader concept than purchasing
◾ Closer relationships with selected suppliers
◾ Emphasizing on managing & developing selected suppliers – long-term win-win relationships
◾ It is cross-functional – involving engineering, quality assurance, R&D, etc.
◾ More strategic – supporting corporate goals

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W H AT IS A SUPPLY CHAIN?

◾ A Supply C hain:
◾ Three or more organizations are linked by one or more upstream or downstream flows of products, services, finances, &
information
◾ Involving organizations from a sources of materials to final customers

◾ Supply C hains
◾ Simple supply chains pull materials directly from their origin, process them, package them,& ship them to consumers

◾ Food Supply C hain

◾ The food & drink supply chain has been a linear relationship involving the primary producers, or farmers, the manufacturers
or processors who fabricate the food for the table,& the retailers who gather a range of such products & sell them to the
consumers

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WHAT IS SUPPLY CHAIN MANAGEMENT?

◾ The management & coordination of production movement,information, & funds from raw material through to
end users (i.e.,final consumers)
◾ Emphasizes on achieving final customers satisfaction & loyalty
◾ Integration between firms is also a focus

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WHAT IS SUPPLY CHAIN MANAGEMENT?

Manufacturing 1st Tier 2nd Tier

Customer Marketing and Logistics Purchasing
Supplier Supplier

Physical Distribution Material Management

Logistics Management

Business Logistics

Demand Chain Management Supply Chain Management

Value Chain Management

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The Business Chain and Some Related Items
W H AT IS A VALUE CHAIN?

◾ A value chain is a sequence of business functions in

which utility (usefulness or values) is added to
products or services as they move from supplier to
customer
◾ Within an organization, the value chain is broader the
supply chain because it includes supporting functions
(i.e.,HR, accounting, etc.) as well

Value Chain Model (Porter,1985)

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W H AT IS VALUE CHAIN INTEGRATION?

◾ Value chain integration involves bringing together different groups, functions, or organizations,either formally or
informally, physically or by information technology, to work jointly and often concurrently on a common business

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WHAT IS LOGISTICS?

◾ The management of the movement of goods between organizations

◾ Recent trend: organizations outsource material or product delivery (i.e.,inbound or outbound logistics) to third
party logistics service providers

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RELATIONSHIPS WITHIN THE SUPPLY CHAIN

◾ Organizations are forming partnerships (or alliances) with other organizations in the supply chain
◾ These require a shared resources (e.g.,information, technologies,etc.) so the entire chain can benefit as a whole

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THE SUPPLY CHAIN UMBRELLA

◾ Supply C hain activities include

◾ Purchasing

◾ InboundTransportation

◾ Quality control

◾ Demand & Supply Planning

◾ Receiving, Materials Handling, & Storage

◾ Material or Inventory Control

◾ Supplier D evelopment

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THE SUPPLY CHAIN UMBRELLA

◾ Supply C hain activities include (cont’d)

◾ Order Processing

◾ Production Planning,Scheduling,& Control

◾ Warehousing/Distribution

◾ Electronic Data Interchange

◾ Shipping

◾ O utboundTransportation

◾ Suppliers and Customers Involvement in NPD (new product development)

◾ Customer Service

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EVOLUTION A N D DEVELOPMENT OF PURCHASING

Before 1939 1940~1949 1950~1969 1970~1989 1990~1999 2000~Future

The Second Management Purchasing Integration with Integration with

Documentary Corporation Supply Network
World War Focus Strategy
Strategy and Information
Technology

Evolution of Purchasing & Supply Management

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EVOLUTION A N D DEVELOPMENT OF PURCHASING

◾ Period One -The early years (1850 – 1900)

◾ Select, purchases, receives, & delivers all materials required

◾ PeriodTwo - Growth of Purchasing Fundamentals (1890 – 1939)

◾ Getting more important around W W I for obtaining important war materials

◾ The development of basic purchasing procedures

◾ Period Three -The WarYears (1940 – 1946)

◾ W W II influenced a growth in purchasing interest

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 EVOLUTION A N D DEVELOPMENT OF PURCHASING

◾ Period Four -The Q uietYears (1947 – mid-1960s)

◾ An essential cost in doing business

◾ A neglected business function

◾ Limited Strategic Focus
◾ Limited Technology and Information

◾ Limited Supplier Relationships

◾ Limited Professionalization and Training

◾ Limited Recognition of Value Creation

◾ Period Five - Materials Management (Mid-1960s – Late 1970s)

◾ A growth awareness in the concept of material management

◾ Focused on reducing costs in material movement & storage 30

EVOLUTION A N D DEVELOPMENT OF PURCHASING

◾ Period Six – The Global Era (Late 1940s – 1999)

◾ Intense global competition

◾ Fast development & spread of technology

◾ Using W W W (via Intranet) to coordinate purchasing activities

◾ Period Seven – Supply Chain Management (2000s – Future)

◾ A growing emphasis on the strategic importance of major suppliers

◾ Using an cooperative approach

◾ Closer integration with important suppliers & other business functions (e.g.,engineering, operation, HR, etc.)

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THE SUPPLY CHAIN SYSTEM

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CHALLENGES IN FOOD & BEVERAGE SUPPLY CHAINS

◾ Increasing demand for food shipping traceability

◾ Dealing with stock keeping unit (SKU) & order complexity
◾ Poor communication between food supply chain partners
◾ The potential for food fraud
◾ Lack of honesty & transparency
◾ Ensuring a superior customer experience
◾ Growing food & beverage regulations
◾ Cost reduction & productivity pressures

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REFERENCE

◾ Bourlakis, M.A. &Weightman, P.W.H. (2004). Food Supply Chain Management. Blackwell Publishing: UK
◾ Chopra, S.(2019). Supply Chain Management: Strategy,Planning,& Operation (7th ed.).Pearson: UK
◾ Eastham, J.F.,Sharples,L.,& Ball, S.D. (2001). Food Supply Chain Management: Issues for the Hospitality & Retail
Sectors.Butterworth Heinemann: UK
◾ Feinstein, A. H. & Stefanelli, J.M. (2012). Purchasing: Selection & Procurement for Hospitality Industry (8th ed.).Wiley:
New Jersey.
◾ Johnson,F.P.(2020). Purchasing & Supply Management (6th ed.).McGraw-Hill: New York
◾ Jonsson,P.(2008). Logistics & Supply Chain Management. McGraw-Hill: UK
◾ Spears, M. C. (1999). Foodservice Procurement: Purchasing for Profit.Prentice Hall: New Jersey
◾ VanWeele,A. J.(2018). Purchasing & Supply Chain Managemetn (7th ed.).Cengage: UK

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END OF LECTURE 1

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