Starwood-Supply Chain Strategy - Research Paper Example

? Starwood-Supply Chain Strategy This paper explores the different sourcing strategies that Starwood uses. The main emphasis is placed on Starwood’s supply chain strategy especially since Starwood is a multinational company with hotels and resorts having different sections. It purchases high-value and complex products from a scrutinized group of suppliers and also gets commoditized items used by the various sections of the company through conventional methods like competitive bidding. The paper also tries to explore whether cooperative orientation is the most appropriate method to use when handling the procurement of items for the company. Using bed linens and terrycloth as the commodity on study, the paper looks at some of the procedures that will be required to procure only the best of the bed linen and terrycloth, citing cases where it is possible to change the suppliers dealing with a particular commodity or product. This paper furthermore explores Starwood evaluation method of the suppliers’ performance in relation to contract metrics that the company will use against the suppliers. Starwood- Supply Strategy Starwood is a multinational company with operations in North America and the Caribbean. It mainly concentrates its businesses in the hospitality industry with many hotels in the United States, Canada and the Caribbean. With such a huge presence in the hospitality industry, it presents a huge challenge especially when handling issues of procurement as all operations have to be coordinated. The procurement gets more challenging when it comes to the supply chain section as the process is continuous with the suppliers providing goods and services to the company. The president of strategic sourcing will mostly be the one in charge of ensuring everything runs smoothly when it comes to procurement. Some factors that might trigger the supply chain includes when sections of Starwood’s hotels might need to change products and get new ones , when the contracts with the suppliers expire and in some cases when the group in charge of the hotel designs come up with new ideas that need to be implemented. Cases where a specific hotel or resort requiring local contract will also call for the involvement of the supply chain department. According to Wieland and Wallenburg (2011), the supply chain is a very intricate and dynamic supply and demand channel. Usually supply chain is made up of various systems of business, people, expertise and machinery, information and also funds for the purpose of transferring a product or service from one party that provides it that is the supplier to another that needs it- the customer. During the supply chain, the end product delivered to the customer can vary from the raw natural resources and materials to machinery. Sourcing Strategy of Starwood When a product needs to be sourced to the hotel, it will have gone into consideration from the specification effected by factors like the customers, maintenance and even the chefs in the hotels restaurant or the housekeeping department in the hotel. If the said product or service is not available or does not exist, it implies that the sourcing will be done from both the domestic and international suppliers. In cases where the product is available then, only the renewal of the contract with the supplier will be viable but in some cases a new supplier might be procured for the supply (Anna 2006). A paper or electronic form will be sent to the potential suppliers requesting information of their services or products and the price quote and all the responses received by Starwood will be kept in a database to help in vetting the suppliers in future too. Thereafter, only the suppliers matching the company’s minimum requirement will be shortlisted. However this will not be necessarily based on the finance of the shortlisted company. Other factors will be considered like quality of the product and service, the area of operation, and also the legalities of the supplying company. Once the candidate has been selected Starwood can call for a reverse auction especially for suppliers provided with short-term contracts where they will out bid each other for commodities that have minimal interaction with the clients like staff uniforms, paints and even keys. In another scenario Starwood sends RFP or Request for Proposal where the suppliers will have to place their most excellent terms for Starwood’s deliberation. Once a supplier with the best terms wins the auction then he will be engaged in negotiation to supply the company with products or services. The contract will not end there as Starwood strives to maintain a relationship with the supplier in order to maximize the quality and also for each party to get the best price out of the negotiated deal. Case Study: Supply of Bed Linen and Terrycloth Bed linens and terrycloth are examples of items that any guest at Starwood will have to use, consequently, having the category of items that customers tend to interact as it has a high visibility to a customer. The products therefore have to be of the highest quality especially in highly rated hotels like the ones owned by Starwood (Lambert, & Supply Chain Management Institute 2006). When it comes to sourcing the products and the supply, the only method viable will be RFP since it is not a commodity like the ones used for reverse auction or competitive orientation. In a recent case just after a deal to supply new bed linens and terrycloth products had been signed, a new supplier came and offered the Starwood a very competitive contract. Starwood took the offer and they had to cancel the other contract they had initially signed with the first supplier. This leads us to ask ourselves, should Starwood maintain cooperative orientation or competitive orientation with its suppliers of bed linens and terrycloth? The answer is two sided implying that for the cases where the commodity does not come into contact with the customer as much, it is best to use the competitive orientation as it has very low impact and a good example will be in the supply of the staff uniforms unlike in the case of the bed linens and terrycloth. As much as they are commodities, they come into contact with the customers on every single day therefore a bad quality will be noticeable and this will have great consequence to Starwood. It will be best to use the cooperative orientation subject to change depending on the mutual agreement between Starwood and the supplier. Starwood would exchange information with the supplier concerning the standards of bed linen and terrycloth they will need including the number of threads and the fluffiness of the bed linens and the terrycloth. Other information concerning bed linen and terrycloth will include the colors, sizes then number, durability and the price ranges among others. Starwood then gets the information concerning the location of the mills making the linen and terrycloth, references of some of the clients and the range of their operation whether they will have Starwood as their sole customer or not. Also of focus will be the legalities of the contract in cases the workers in the mills strike or the shortage of raw materials for making linen and terrycloth. Proprietary information during Request For Information (RFP) can lead to the information being shared with merchants who were not selected and they may in turn forward the said information to the competitor therefore the information has to be in moderate form (Andreas & Carl 2011). When sourcing for bed linen and terrycloth; the best approach will be the cooperative method as they are not on customers’ visibility. By choosing the cooperative orientation, the supplier will provide information about their products through the “request for proposal” and this will be a better way to gather details about possible suppliers and their products. If any new supplier brings forth a better offer after the contract has been finalized, the new offer has to be checked out whether the supplier promise of a durable bed linen and terrycloth is true and whether the fabrics on them have better thread count. Since Starwood uses cooperative orientation with the suppliers on the bed linen and terrycloth supply it will be prudent to approach the current supplier and inquire if they can match the competitor’s offer. If not then Starwood can extend their relationship by helping the supplier get new sources thereby maintaining the business relationship. This was the case on the bed linen and terrycloth supply. If the current supplier to Starwood is offered an opportunity to match offer made by an interested supplier and they fail to match the offer then the supplier can be changed to the one with a better offer. The same goes to the quality of bed linen and terrycloth: If the quality of the terrycloth and bed linens are greater than the current quality used by Starwood then the contract can be terminated as most contracts signed between Starwood and the supplier have a clause which can allow both the client and supplier to exit peacefully if need be for diverse rationale. The evaluation of the performance of suppliers can easily be measured on the basis of contract metric. Some of the ways that Starwood uses to measure the contract metrics include the percentage of bed linen and terrycloth delivered on time meaning that the higher the percentage the better the working relationship. Time taken to fulfill the bed linen and terrycloth orders will also be a great factor on the contract between the supplier and Starwood. Sometimes there might be defective bed linen and terrycloth, this will play a major part as the percentage will be calculated over the effective bed linen and terrycloth thus the lower the defectiveness the better. Lastly the total cost of services rendered by the supplier and the total cost of purchased bed linen and terrycloth will determine the performance of the supplier to Starwood. Conclusion Starwood supply chain strategy is complex since it has so many facets in it and while understanding the fundamentals of the case study. Some factors affect the mode in which the cooperative orientation and competitive orientation will be conducted between Starwood and the suppliers. It is important to review the Sourcing strategy that Starwood uses. The same activities done by Starwood can be related to other organization and they can replicate the experiences and the activities done by Starwood especially in the hospitality industry. References Andreas W. & Carl M. W. (2011). Supply-Chain-Management in sturmischen Zeiten. Berlin. Anna Nagurney (2006). Supply Chain Network Economics: Dynamics of Prices, Flows, and Profits, Edward Elgar Publishing. Lambert, D. M., & Supply Chain Management Institute. (2006). Supply chain management: Processes, partnerships, performance. Sarasota, Fla: Supply Chain Management Institute. Read More