Batangas State University The National Engineering University -

ARASOF Nasugbu Campus

Chapter 3:
The Supply Chain
Management
Process

Prepared by:
Mr. Alessandro A. Pasague, CHP, COMS
Chapter Objectives
By the end of this chapter, the students should be able to:
[Link] the key components of supply chain management,
including suppliers, products, and returns.
[Link] how supply chain management works in the hospitality
industry.
[Link] strategies for implementing effective supply chain
practices in hotels.

Chapter Outcome
Demonstrate understanding of supply chain processes, including
supplier development, product flow, and returns management.
How does supply chain management work?
Supply chain management operates by managing procurement, suppliers, manufacturing
facilities, dealers, distributors and consumers as they step forward through the
production, sales and purchasing processes.
With effective SCM, inventory, production, distribution, sales and vendor inventory are all
tightly controlled.
SCM means managing costs at every step and delivering goods to consumers as quickly as
possible. It assumes that every product that is for sale exists because of the various
participants in the supply chain.
Responsibility of the supply chain manager

The carefully researched and developed

strategy of supply chain.
The source of the materials used to make the
goods to sell.
The efficient production of the manufacturing
process in getting the goods ready for the
market.
The delivery mechanisms and logistics that
move the products to the consumers and
distributors.
The system for managing the return of
defective or unwanted products.
The Components of Supply
Chain Management
I. Plan
In order to address how the products and services
will fulfil the demands and necessities of the
customers, we must design a plan or strategy.

This has to deal with the raw materials necessary at

each phase of manufacturing, the capacity and
constraints of the equipment, and the personnel
requirements throughout the SCM process.

For gathering data and plan development, large

organizations frequently use modules from
Enterprise Resource Planning (ERP) systems.
I. Plan
Each planning must be based on reliable
information. Choosing the metrics to employ the
monitor a supply chain’s efficiency and
performance might be one of the most significant
SCM decisions a company needs.

A strategy has to be designed by the companies

for managing all the resources required for
designing products and providing services.

If the firm makes finished products, the next

question is where the raw materials will be
acquired. Will it be sourced from local, regional, or
international vendors?
Develop (or Source)
After strategies have been developed and data has
been gathered, companies must choose suppliers
who can help them carry out their plans.

This includes not just choosing reliable suppliers, but

also determining various shipping, delivery, and
payment method for the products.

To do this, you must respond to numerous question

such as:
“Can this supplier handle the volume of materials
needed to satisfy demand?”
“Has the supplier established contacts to transport
the final components to the manufacturing facility?”
Develop (or Source)
After selecting the most qualified employees, companies must
be able to oversee their work and manage their ongoing
relationships with suppliers.

In this stage, supply chain managers need to construct a set

of pricing, delivery and payment processes with suppliers and
also create the metrics for controlling and improving the
relationships.

Finally, the supply chain managers can combine all these

processes for handling their goods and services inventory.
This handling comprises receiving and examining shipments,
transferring them to the manufacturing facilities and
authorizing supplier payments.
Develop ( or Source) – Supplier Development

Supplier Identification
Generally supplier base is huge in the hotel industry, this has
its positives, conscious steps should be taken to identify
committed suppliers who are willing to go by the objectives of
the organization, and be involved and appreciate and support
the changes of the organizational requirements.

Supplier Evaluation and Selection

Supplier evaluation is a critical process, suppliers ability to
supply the right goods at the right time with correct
specifications has to be reviewed. Contracts are awarded
after careful negotiations with the supplier.
Develop ( or Source) – Supplier Development

Supplier Management
After the suppliers fulfills its obligation by delivering the
required goods as per specifications it's the responsibility of
the purchasing department to ensure suppliers bills are paid
promptly, at times good suppliers are lost due to the payment
delays. Therefore its very essential to maintain a strong
relationship with the supplier hence supplier management has
to be strengthened.

Supplier development and improvement

It's a very crucial step in the supplier chain management. A
careful consideration of this process would contribute
towards efficiency and cost saving.
Make
The manufacturing stage involves designing, producing,
testing, packaging, and preparing products for delivery. At
this point, the supply chain manager plays a crucial role in
scheduling and coordinating all related activities. It is the
most metric-driven stage, where firms measure quality,
output, and productivity.

Maintaining high-quality standards ensures customer

satisfaction and minimizes downstream issues. A good
supply chain manager evaluates the following:
The quality of raw materials before to accepting them
Puts procedures in place to reduce mistakes on the
production line
Tests the quality of the finished product further
Guarantees that this quality will not be damaged while
packing and shipping.
Make – The Product Development within
Hospitality Environments
Product development is the process of evaluating products and
services to identify opportunities for improvement, profitability,
and customer satisfaction. It focuses on upgrading existing
offerings to meet market trends and customer needs, often
supported by modern technology. According to Kotler, product
development involves three levels:
Core Product – the basic benefit or service, such as
comfortable rooms and dining in a hotel.
Tangible Product – the physical elements customers can see
or experience, like restaurant meals or hotel facilities.
Augmented Product – additional value-added services, such
as spas, fitness centers, or activity packages.
Overall, product development ensures businesses enhance
quality, adapt to market changes, and increase customer
satisfaction.
Make – The Product Development within
Hospitality Environments
Product development process five major steps can be diagnosed.
1. Generation of Idea - the idea-to-technology process begins with market
research, which identifies consumer needs and confirms product or service
requirements.
2. Screening Process - ideas are gathered from media, customers, and employees,
then analyzed against market trends and competition.
3. Evaluation Idea / Development of Concept – during this stage projected costs,
income, and profitability are assessed, often supported by market research and
identification of initial target customers.
4. Product Development / Business Analysis - involves creating the physical
product, determining pricing, and conducting evaluations.
5. Commercialization Process - the product is launched with production, marketing
campaigns, and distribution.
Deliver
The fourth stage of the supply chain is delivery, also known as the
logistics phase. In this stage:
[Link] orders are processed
[Link] are scheduled for dispatch
[Link] are delivered to their destination.

It involves activities such as warehouse management, carrier

selection, invoicing, billing, and payment collection.

Effective supply chain management ensures coordination across

these logistics functions to achieve timely delivery and avoid
overproduction. In today’s market, products reach customers through
multiple channels—company-owned stores, websites, retail partners,
and third-party platforms. Since many of these require outsourcing to
delivery and haulage partners, accurate monitoring and streamlined
processes are critical for efficiency and customer satisfaction.
Return
Even with an effective supply chain, challenges such as defective
products, shipping delays, or damaged goods are unavoidable. One of
the key principles of SCM is to handle these issues by accepting
product returns, addressing customer complaints, and processing
cancellations or refunds when necessary.

The final stage of the supply chain is return management, where

defective, damaged, or excess goods are sent back by customers.
This stage is often problematic, requiring companies to build a
responsive and flexible system for handling returns efficiently while
maintaining customer satisfaction.
Return - Returns Management
Returns management merges both challenges and opportunities in
inbound logistics. A well-designed reverse logistics program connects
the supply of returned products with product information and demand
for repairable or reusable materials. It is supported by three main
pillars:
Speed – Quick and efficient processing of returns through
automated workflows, return material authorizations (RMAs),
barcodes, labels, and user profiles.
Visibility – Capturing information early in the process, ideally
before products reach the receiving dock. This is enhanced by
web-based portals, carrier integration, and bar-coded identifiers.
Control – Coordinating material movements, ensuring compliance,
and reconciling returns with quality standards. This involves strict
attention to receipts, regulatory compliance, reconciliation, final
disposition, and quality assurance.
Post - Sales Service
After delivery, businesses increasingly compete not just with products but also with solutions. Post-sales
service has become a critical factor in customer satisfaction and long-term profitability. These services include:
Supplying spare parts and upgrades,
Performing inspections, maintenance, and repairs,
Offering training, education, and consulting.
Given rising customer expectations, post-sales services have evolved into a profitable, value-added component
of supply chain management. Unlike pre-sales services, they are highly diverse and tailored to client needs.
 Consumables in Hospitality
No matter the size of a hotel or restaurant,
failing to maintain proper supplies can
seriously damage customer satisfaction and
loyalty.

Imagine a hotel unable to serve breakfast

due to running out of ingredients, or a bar
with no beer or wine to offer. Similarly,
restaurants that cannot serve their full menu
risk disappointing guests, driving them to
competitors, and losing repeat business.

In hospitality, food, beverages, clean linens, tableware, and other essentials are critical to the guest
experience. Running out of these items undermines service quality and can harm the establishment’s
reputation. Effective supply chain management ensures a steady flow of goods, prevents shortages,
and supports the seamless delivery of hospitality services. Without it, the very foundation of guest
satisfaction—and the success of the business—would collapse.
 Implement Supply Chain Management in Hotel Industry
Various concepts have been developed to explain how logistics and supply chain management (SCM) can be successfully
implemented. In the hotel industry, these activities are often categorized into strategic, tactical, and operational levels to create
a systematic approach:

Tactical Level

Executive Support – Senior management buy-in is critical. Leaders must communicate the importance of SCM initiatives,
ensuring employees understand their role in achieving business strategy.
Visibility and Control – Hotels need real-time visibility of supplier and vendor decisions to make informed choices about
transportation, shipping, and overall costs.
Benchmarking – Performance should be measured against set targets (e.g., order filling, transportation, vendor
compliance). Benchmarking helps identify gaps and improve processes.
Creative Solutions and Risk-Taking – To reduce costs and increase margins, hotels must innovate in negotiations, pricing,
and customer service strategies.
 Implement Supply Chain Management in Hotel Industry
Various concepts have been developed to explain how logistics and supply chain management (SCM) can be successfully
implemented. In the hotel industry, these activities are often categorized into strategic, tactical, and operational levels to create
a systematic approach:

Strategic Level

Change Management – With the fast pace of the hotel industry, managers must embrace innovation, address vendor issues,
and adapt processes in real time.
Lean and Green Thinking – Applying lean principles helps reduce waste, save money, and deliver customer value. Focusing
on procurement, design, and distribution ensures efficiency and sustainability.
Top Talent and Accountability – A strong foundation requires skilled managers with expertise in logistics and supply chain
functions to drive results.
Right Information Technology – Modern SCM depends on IT systems that enable real-time decision-making, data visibility,
and effective communication across logistics, transportation, and distribution.
 Implement Supply Chain Management in Hotel Industry
Various concepts have been developed to explain how logistics and supply chain management (SCM) can be successfully
implemented. In the hotel industry, these activities are often categorized into strategic, tactical, and operational levels to create
a systematic approach:

Operational Level

Cost Management – Monitoring purchase and inventory costs is vital, especially for perishable products and frequently
replenished items.
Simplifying Complexities – Segmenting supply chain functions helps eliminate non-value-adding activities and strengthens
supplier negotiations.
Right Metrics – Key performance indicators (KPIs) should be applied to monitor supplier and vendor performance (e.g.,
delivery, cost, productivity). Scorecards, like those used by Starbucks, improve accountability and transparency.
Risk Management – Hotels must assess risks in supply chain processes and share risk information across networks to
enhance resilience and decision-making.
Learning
Highlights
SCM ensures steady availability of
essentials in hospitality, directly
affecting guest satisfaction.
The process covers idea generation,
manufacturing, delivery, returns, and
post-sales service.
Supplier development and product
development are key to meeting
customer needs.
SCM functions at strategic, tactical,
and operational levels to link long-term
goals with daily operations.
End of Chapter 3
Thank You!