Supply Chain Management in Hospitality Sector - Essay Example

Running Head: SUPPLY CHAIN MANAGEMENT Supply Chain Management in Hospitality Sector Supply Chain Management In current years supply Chain management (SCM) has received a huge deal of trade press and academic concentration. For numerous chief executive officers (CEO) the time has come to shift notice to their supply base and hug the principles of SCM. The resource-based approach to planned management suggests that spirited advantage can be found in the varied resources and ability a firm controls. Resources that are valuable, rare, hard to duplicate, and can be browbeaten by the organization can create sustained competitive benefit and earn over standard financial performance. Numerous management specialists propose that companies that learn to get bigger their organizational supply Chain management will have a spirited advantage. These learn looks at the conquest that Nokia has had in organization supply Chain in Turkey (Bashein, B. J., 2004, 7-13). In a globe where products are copied approximately as soon as they are set up into the market, building and supporting spirited advantage is a main anxiety for today's CEOs. For this reason, there is a brawny link amongst how firms manage their people and the financial results achieved. Results from studies of five year staying power rates of initial public offerings; studies of output and stock price in large samples of corporation from manifold industries; and thorough research on auto, clothing, and other industries shows that substantial gains of about 40% can be obtained by implementing high performance management practices. An additional purpose of this paper is to increase about to happen into supply Chain ability and the factors that get better its growth. If members of a supply Chain are to flourish together they must admit that a learning environment improves the overall efficiency of the supply Chain as well as the aptitude of the entity members (Stump, R. L., 2001, 29-48). One significant management practice for lots of companies is the association that they have by means of their suppliers. Supply Chain partnerships are relationships flanked by two or more self-governing entities in a supply Chain to achieve exact objectives. Basically, these partnerships are usually created to add to the financial and operational presentation of every channel. These objectives are talented from side to side reductions in total costs, reductions in inventories, and greater than before levels of shared information. Over a period of time these partnerships can develop and lead to better service, technological novelty, and product design. LITERATURE REVIEW 2.1 Introduction: The purpose of this chapter is to provide a summary as well as an interpretation from research findings of the secondary data, by books, journal articles, reports, electronic databases and websites in order to drown the literature. In addition, an in-depth analysis of the roles and purpose of the SCM in organizations in general will be included, how SCM assists in the organization and how SCM helps the organization strategy. Moreover, the research is concentrated on the SCM in Cyprus. Finally, some information about the SCM in hotels will be given. This chapter is very helpful in increasing the knowledge relative to the studying area since the results and the findings of the primary data will be related with the literature review. Therefore, the knowledge from literature review is going to provide a more professional research that will focus on the purpose of this research. Also, the purpose of this is to offer an overview of significant information published on the topic in order to narrow down the research questions to a specific, suitable form. 2.2 SCM an overview: From an academic perspective, SCM is still a relatively new term that is struggling to gain credibility and sit alongside more established disciplines (Marchington and Wilkinson, 2002). Nowadays, the SCM departments are necessary for each organisation. By having SCM, organisations can increase their performance and create competitive advantage. It is often contrasted with 'industrial relations' and 'personnel management', the former laying claim to represent the theoretical basis of the subject while the latter is viewed as the practical and prescriptive homeland for issues concerning the management of employment (Marchington and Wilkinson, 2002). The concept of SCM, as a more effective and productive approach to managing organizations' key assets, its people, has attracted enormous attention and stimulated significant debate among academics and practitioners (Storey, 1992; cited by McGunnigle and Jameson, 2000). It has generated a huge volume and diversity of literature over the past decade and has even created a new vocabulary (Blyton and Turnbull, 1992; cited by McGunnigle and Jameson, 2000). The concept has caused considerable controversy (Guest, 1989; Storey, 1995; cited by McGunnigle and Jameson, 2000). Human capital has long been held to be a critical resource in most firms (Pfeffer, 1994; cited by Liao, 2005). SCM is one of the principal mechanisms by which managers integrate the actions of individuals to keep their behaviour congruent with the interests of the firm (Goold and Quinn, 1990; cited by Liao, 2005). SCM need to create good and friendly relationship with the employees at all levels in order to influence the employees to make them feel that the organisations stand by them. Moreover, they need to provide the employees' satisfaction in order to increase organisation performance. Business leaders now recognize that the SCM function has a direct impact on bottom line results and must be aligned with corporate goals. Both academics and practitioners agree that as the dynamics of competition accelerate, people are perhaps the only truly sustainable source of competitive advantage (Reich, 1990; Stewart, 1990; cited by Liao, 2005). The efficiency and performance of the staff, and their commitment to the objectives of the organization, are fostered by good human relationships at work (Mullins, 2002). It is essential though for employees to be happy in the working environment, to feel secure and that the organisation cares about them. This demands that proper attention be given to SCM, the personnel function and employee relations. The manager needs to understand the importance of good managerial practices and how to make the best use of people (Mullins, 2002). Therefore SCM may provide the opportunity to organisations to achieve satisfaction among employees and increase their performance. The promotion of good human relations is an integral part of the process of management and improved organisation performance (Mullins, 2002). SCM exhibits philosophical characteristics, which include the belief that investment in people is good business because people make the difference to organizational performance and an emphasis on the alignment of the objectives of the individual with those of the organization (Corbridge and Pilbeam, 1998). According to Mullins (2002) the human element plays a major part in the overall success of the organisation. There must be an effective personnel function. The recent years there has been an increasing use of the term 'SCM' to replace the term 'personnel management'. However, this Chain is still subject to debate and controversy. Another characteristic of SCM is the unitary employment relations frame of reference which consists of commitment and shared employer and employee interests and a final one, the alignment of the personnel and development function firmly with managerial interests and aims (Corbridge and Pilbeam, 1998). 2.3 The role and purpose of SCM: In turn, SCM practices and systems have been linked to organizational competitiveness, increased productivity, higher quality of work life, and greater profitability (Cascio, 1992; Schuler and Jackson, 1996; cited by Stavrou-Costea, 2002). In a globalize economy, competitiveness means the ability to take the most advantageous position in a constantly changing market environment (Pfeffer, 1994; cited by Stavrou-Costea, 2002). In order for this link to be accomplished between SCM and organizational success, the role of SCM must become strategic instead of operational, aligning the SCM function with the strategic needs of the organization (Pickles et al., 1999; cited by Stavrou-Costea, 2002). SCM should have appropriate methods of recruitment and selection, to provide a good training system, appraisal and performance, rewards and as well to make the employees to feel secure and create good employees relations in order organization to achieve the best result. SCM can be said to be the responsibility of all those who manage people, as well as a description of persons who are employed as specialists. It is that part of management that involves planning for SCM needs, including recruitment selection, training and development, promotion and transfer, redundancy and retirement. It also includes welfare and safety, wage and salary administration, collective bargaining and dealing with most aspect of industrial relations (Appleby, 1994). 2.3.1 Recruitment and selection: The importance of ensuring the selection of the right people to join the workforce has become increasingly apparent as the emphasis on people as the prime source of competitive advantage has grown (Beardwell et al, 2004). Nowadays people are more educate from the past, organization has the opportunity to find the appropriate people for the appropriate work. So organization need to use the most appropriated methods of selection in order to chose the correct employees. Recruitment and selection is a crucial element of SCM in all organizations, irrespective of their size, structure or sector. Over the last two decades this area of SCM practices has become more sophisticated, involving the assistance of organisational psychologists or consultants to improve reliability and validity of selection decisions (Marchington and Wilkinson, 2002). The recruitment and selection process is concerned with identifying, attracting and choosing suitable people to meet an organisation's SCM requirements. They are integrated activities, and 'where recruitment stops and selection begins is a moot point' (Anderson, 1994; cited by Beardwell et al, 2004). Nevertheless, it is useful to try to differentiate between the two areas: Whitehill (1991) describes the recruitment process as a positive one, 'building' a roster of potentially qualified applicants', as opposed to the 'negative' process of selection (Beardwell et al, 2004). 2.3.2 Training and development: From a company perspective, training and development of company employees is essential for organisational operation, and organisational advancement. From an employee perspective, these same factors are both crucial and critical for skill development and for career advancement. Retention of employees, and the retention of valued skill sets, is important for continued business achievements (Mak and Sockel, 1999; cited by Acton and Golden, 2003). The successful retention of employees leads to knowledge preservation within the organisation (Cappelli, 2000; cited by Acton and Golden, 2003). 2.3.3 Performance Appraisal: Employee performance appraisal (PA) is a subject of great interest in most organisations (Armstrong, 1998; Bratton and Gold, 1999; cited by Ahmad and Ali, 2004). This is because PA decisions have effects and consequences on workers' compensation and recognition (Ahmad and Ali, 2004). By providing to the employees feedback and showing how to them what are their weaknesses and strengths, the improvement in their working environment can be achieved. But this feedback needs to be done in an appropriate way in order to have good results and not to make the employees become worse. The performance appraisal system (PAS) is also important as a management tool to assess employees' efficiency in the workplace (Armstrong and Baron, 1998; cited by Ahmad and Ali, 2004). 2.3.4 Rewards management: A well-designed reward system can be helpful in promoting employees to perform sound environmental practices (Govindarajulu and Daily, 2004). Moreover, the creation of a reward system by the SCM department can provide to the employees motivation in order to increase organisational performance. Work rewards refer to the intrinsic and extrinsic benefits that workers receive from their jobs. Rewards can be a reinforcement to continuously motivate and increase commitment from workers to be environmentally responsible (Herzberg, 1966; cited by Govindarajulu and Daily, 2004). Rewards can be implemented in several forms such as financial rewards and recognition awards. Award and recognition programs, profit-sharing programs, increase in pay, benefits and incentives, and suggestion programs are some of the systems that can be used to reward employees for good environmental practices (Atwater and Bass, 1994; Laabs, 1992; Leitch et al., 1995; Marks, 2001; Patton and Daley, 1998; cited by Govindarajulu and Daily, 2004). 2.3.5 Employee Relations: Sound personnel policies help to foster good employees' relations. Broadly defined, employees' relations are concerned with the relationships between the policies and practices of the organization and its staff, and the behavior of work groups (Mullins, 2002). 2.4 How SCM support the organization: A robust SCM system will be the most valuable asset of a twenty-first century institution, and an enterprise's productivity is closely correlated with the employee-related managerial system (Chen et al., 2003). There is a growing number of studies providing evidence of the fact that the SCM of an organisation, when aligned to strategic business planning and organizational culture, can be a source of competitive advantage (Khatri, 2000; Poole and Jenkins, 1996; cited by Panayotopoulou and Papalexandris, 2004). SCM can create values for an enterprise by finding ways to improve workforce managements that have a positive impact on performance. Since SCM has a significant influence on the overall management system, it is well positioned to create substantial added value (Chen et al., 2003). The modern corporate environment has initiated many Chains in all organizational functions that have inevitably affected the SCM function. The latter is now facing a major challenge that has to do with the content of SCM. According to Ulrich (1997, 1998) there is a shift of emphasis from the traditional SCM practices to SCM deliverables, making stakeholders interested in the way in which SCM contributes to the organizational success (Panayotopoulou and Papalexandris, 2004). The SCM department concerning the organization it needs to find innovated strategies in order to create the diferenceation from the competitors and to take competitive advantages. In general, a strategic approach to SCM involves the designs and implementations of a set of internally consistent policies and practices that ensure a firm's human capital to contribute to the achievement of its business objectives (Baird and Meshoulam, 1998; Jackson and Schuler, 1995; Schuler and Jackson, 1987; cited by Chen et al., 2003).Fundamental to the strategic SCM perspectives, there is an assumption that firm performance is influenced by the set of SCM practices a firm has in place (Arthur, 1994; Cutcher-Gershenfeld, 1991; Huselid, 1995; Huselid and Becker, 1996; MacDuffie, 1995; cited by Chen et al., 2003). SCM process is a support process. It exists to support all other processes within the organisation. Therefore, all other processes are customers of the SCM business processes. The SCM process, in supporting its customers, must ensure that it maximises its contribution to the overall business objectives and strategy (Cakar et al., 2003). In the literature there is further confusion concerning SCM models and their classification. The most commonly referred to models for SCM (see Figure 2) include: Michigan model (Fombrun et al., 1984; cited by Cakar et al., 2003), which consists of two perspectives: the strategic and environmental perspective; and the SCM perspective. Figure 2: Michigan model of SCM (Cakar et al., 2003) The strategic and environmental perspective represents the relationship between SCM and organisational strategy as well as the political, economic and cultural forces which affect them. They have interactive relationships. The SCM perspective provides a simple framework to show what the relationship should be between selection, appraisal, rewards and training and the effect on performance (Cakar et al., 2003). 2.6 SCM in hospitality industry: Before discussing SCM strategies in the hospitality industry it is useful to offer an insight into the unique characteristics shared by service industries. Sasser et al. (1987) describe four main characteristics which render the sector as fundamentally different from manufacturing industries, namely simultaneity; heterogeneity; intangibility; and perishability. Simultaneity refers to production and consumption of services; clearly these occur simultaneously. For example, a meal in a restaurant is consumed as part of the process of the whole event, immediately after it has been prepared and while the consumer and producer are in close proximity, unlike manufacturing where the producer may be thousands of miles from the consumer. Heterogeneity describes the way in which hotels and restaurants aim to reproduce the same quality of service each time but in actual fact this can vary substantially from establishment to establishment and from day to day because of the variables, e.g. staff attitude, mood, atmosphere, etc. Services are intangible; therefore the quality of the service is indefinable and will vary from consumer to consumer depending on their experiences, perceptions and expectations. Finally, perishability indicates that services have a definite lifespan and cannot be stored. For example, if a hotel has 100 bedrooms and on any given night sells only 90 rooms, those ten bedrooms that remain unsold are "lost sales" as they can never be sold again at a later date (Sasser, et al., cited by Biswas and Cassell, 1996). Taking these four factors into consideration it becomes clear that the role of the employee in the service process is vital. The employee is the service provider; therefore the human resource strategy is clearly of great significance in terms of securing the operational success of the organization (Biswas and Cassell, 1996). SCM in hotels is two-ice important from other organizations tSCMough the intangibility of the services. Employees are come in contact with the customers and the value of the service is depending from employees. The key to superior returns really lies in the way staffs deal with customers in the context of these surroundings. This includes the way in which guest preferences are discovered and catered for successive visits. It means that there is a role for investments in the more intangibles: in broader, more empowering job design, in development interviews and more comprehensive training, and in staff committees and surveys tSCMough which management learns about employee motivation (see figure 3) (Boxall and Purcell, 2003). Figure 3: A strategy map in the luxury hotel industry (Boxall and Purcell, 2003) As Figure 3 illustrates, SCM strategy becomes the primary driver of competitive differentiation in the context. Helps to illustrate the way in which there are opportunities to make better use of staff discretion in many types of services, not simply in those, such as professional services, where skill levels are traditionally perceived as high (Boxall and Purcell, 2003). Many authors agree that SCM play a vital role in organizations, but for service organizations, like hotels, the role of SCM is twice important because there is not other way to provide service without the participation of the employees. In addition, the successful provision of the service is linked with the employee's performance and skills. So, SCM and employees in hotels industry need to have good relations, need to trust each other, and in addition, SCM needs to take some measures in order to increase the performance of the employees. 2.7 Conclusion: In this section, the author gives an overview of the SCM. The SCM is a new term that provides the opportunity to the organizations to increase the performance as a whole and to create competitive advantage. Also, this chapter mentions the purpose and the multiple roles of the SCM that clarifies its significant importance in every organization. Recruitment and selection, training and development, performance appraisal, rewards and employees' relation are some of the roles of the SCM that has the purpose to create a good team in order to achieve the organization's goals. Moreover, the author mentions how the SCM supports the organization. In the appropriate methods and strategies the SCM can create values for an organization and those values can improve the performance with the purpose of competitive advantage. However, from existing research about the SCM in Cyprus, the island where the hotels that the research will be conducted on, show that the role of SCM among Cypriot organisations is not strategic, and only 23.9% of the small organizations and 44.4% of the larger ones claimed to have a written SCM strategy Finally, in this chapter the SCM in the hotel industry is mentioned. The SCM in the hotel is twice important, because service is intangible asset and in order to achieve customer satisfaction all the things depend on the employees. Through existing research it can be seen that the SCM in the hotel it still underdeveloped and lacking in sophistication. 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