SUPPLY CHAIN MANAGEMENT PRACTICES IN HOSBITALITY INDUSTRY:
A study of hotels in Vienna
1. Objectives:
The main purpose of this research is to conduct an academic work on SCM from hotel industry point of view.
Hotel industry has high fix costs, as the hotel is open all around the year, days and nights. Thus, it is so critical for the owners to reduce the variable costs. Hotels operate the long running hours (24/7) and with high fixed costs, a fixed fate of supply but a fluctuating, seasonal and often unpredictable of demand (Mullins, 1993). Therefore, hotels should be operated and managed as efficient as possible. One of the way to reduce the variable costs is to have an efficient SCM. Despite the importance of the subject, there is not sufficient researches and studies about SCM in hotel. There is a significant lack of researches on the field of SCM about hotel industry (Odoom, 2013). Especially about the hotel industry in Austria and particularly in Vienna.
Vienna, has a strategically and politically role in international levels and so many meetings, conferences and festivals are held in Vienna, on the other hand tourism industry is one of the most income of this country (accounting for around 10 percent of Austria's GDP) therefore paying attention to this field is necessary. Therefore, the goal of this study is to make a comprehensive research on the supply management practices and performances hotels in Vienna and at the end compare them and come to the conclusion.
This paper will focus on three part of SCM for cutting down the costs, the first part is upstream, which is related to selecting the suppliers, second part is internal operation which deals with inventory and the last part is downstream, focused on performance and customer satisfaction.
In this process there are some factors which act like catalyzer or constraints, this paper will be go through them by conducting interview with the head of hotels and figure out their practices and methods regarding to the SCM. The questions will be around their operational tactical and strategical decisions and programs regarding to the supply chain management.
In the beginning, SCM focus was mainly on improving the traditional organization functions like logistic and purchasing, from operations to strategic level (Houlihan 1984; Christopher 1992). However, recently the SCM concept is developed, and covers the management of inter- and intra-organization problems with the concepts related to the supply management and supplier management on both strategic and operational way (Cox 1999; Mills et al. 2004; Chen and Paulraj 2004).
Figure 2. Hotel supply chain activities focused on food services. Source: (Akkaranggoon S., 2010)
In addition, this research will go through the operation of inventory management and investigation of how the hotels improve the performance of inventory by applying different approaches like JIT or reducing the lead times (needed time between ordering a product to its delivery) by different methods like streamlining SC system. Streamlining SC systems reduces the lead time, cutting down the demand uncertainty, and assist to make a reliable supply (Kazemi et al. 2014).
2. Research Question:
1. Which SCM practices are used mostly by hotels in Vienna?
2. Which factors have influence on implementing supply chain in a hotel?
3. How SCM can improve internal operation of Vienna’s hotels?
4. Is there any relationship between hotel’s features and applied SCM?
3. Literature Review:
SCM is introduced in 1982 as a scientific and managerial term (Oliver and Webber, 1992) to explain the hierarchical control system for material, information and financial subjects in a network of independent decision making entities” (Agrel and Hatami-Marbini, 2010, p.2). It is one of the most influential developments in business management and has significantly improved organizational competitiveness (Lambert and Cooper 2000; Croom et al. 2000; Gunasekaran 2004; Giannakis and Croom 2004; Cousin et al. 2006). It is the method of managing the current relationship between upstream which is related to the suppliers and the downstream part, which deals with customers to improve the value in the final market with less cost (Christopher, 1998).
SCM has obtained lots of attention in manufacturing and service industries as the suppliers play an important role in maintaining the cost and quality of the purchasing (Fantazy, et al., 2010). SCM is the process coordinating the different participating entities directly or not directly to deliver a product to the final customer (Lummus et al. 2001).
In 2015 a model of hotel SC is proposed by Xu and Gursoy as a network of linked organizations in hotel sectors which are involved in the activities of providing different kinds of products and services that are necessary for the hotel (like food, furniture, equipment, distribution and product marketing) and customers. Based on this definition, a hotel supply chain involves suppliers of all goods and services offered by the hotel to the end customers. The hotel supply chain is depicted in Figure 1.
Figure 1. Hotel supply chain framework. Source: (Xu and Gursoy, 2015)
Main part of investment of each organization is related to inventory (Masudin et al, 2018). One of the factors, which has impact on SCM, and cost reduction, is efficient management of inventory. Based on Millar’s research in 2015, keeping inventory in an efficient way gives the organization the ability of being responsive to customer demands (Millar, 2015). The costs will be reduced, if the demand of customers is met in the most efficient way (Ondoro Ochieng Victor, 2018). It shows the importance of managing the inventory (Ondoro Ochieng Victor, 2018).
The definition of SSCM, service supply chain management, is a way for predicting, planning, implementing, and controlling the process of the SC to make the needs of customer satisfied efficiently. It deals with coordination, integration and controlling the product, information and finance flows both in the organization and among the collaborators (Boon-itt and Pongpanarat, 2011 P.217-218).
Hotel owners need to diversify the hotel’s services from its competitors to reach a competitive advantage. Hotel SSCM consists of the chain of activities such as reception, housekeeping, food and beverage, maintenance and administration (Paraskevas, 2001).
In Supply chain of a hotel supplier, relationship management is one of the main concepts (Cho et al., 2012). In addition, for hotel industries, supplier relationship management is one of the main concepts (Cho et al., 2012). A well-organized and proper management in supplier relationship in the hotel industry can help to acquire a competitive advantage with improved quality and service, and deducting the costs (Odoom, 2012). The third part and last part of consideration is downstream level, which is related to the customers’ satisfactions. Hotel guests consider hotel services like food and beverages as a component of the hospitality service of the hotel, they think such services defines the hotel’s image and has a significant impact on their experience of staying in the hotel (Hemmington & King, 2000).
4. Methodology:
This investigation is based on qualitative research by conducting a semi-structured interview. Interview is a conversation, which fallows a specific purpose (Maykut & Morehouse 1994, P. 79). In contrast, of manufactories, the output of service industries, like hotels, is intangible, therefore qualitative research is preferred to measure the performance (Basu and Wright, 2008). Qualitative research provides the best captured in words and actions and is one of the most useful methods of collecting semi-structured interviews data (Maykut & Morehouse 1994).
During the interview, the questions will be asked in a systematic way, followed by recording the answers, which later will be analyzed, to have a better result by computer program Nvivo.
Nvivo will aggregates the textual data into a hierarchy of themes. The data will be analyzed according to the suggested guidelines by (Long 2007) as below:
1. Listening to the recorded audios some times to be able to get point of interviews
2. Sum up the data with transcribing the recorded audio.
3. Data organization
4. Display the findings
5. Conclude based on the research questions and data
In addition to get the primary data about the hotels for comparison there will be also questionnaire for analyzing the data by Spss. Gathered through questionnaire will be used to answer, the fourth research question (If there is any relationship between hotels features and applied SCM.)
The questions of interview will be semi-structured and designed in advance to have more control during the interview and keep it in the line and focused. On the other hand, it is important to keep the answers valid and more reliable for the analyzing part; therefore, it will not be completely structured but further free and open. It also helps to have space for changes and adding more explanations.
Semi-structured interviews gives this chance to the researcher to have control over the interview at the same time it gives the respondent the opportunity to answer in the words on issues that he or she considers more important, rather than responding within the predetermined categories or checklists which are defined by researcher (Marshall and Rossman 1995).
The interview will be face-to-face interview. Because the researcher should be able at the same time verify the respondent’s answers otherwise the answers may cause misunderstanding or misinterpretation (Frankfort-Nashmias and Nachmias 1996). Also, semi-structured interview allows the researcher to learn from the subjects’ points of view by using probing questions adjusted to the level of language used by the participants which arise from the interview itself (Berg 2009).
Vienna has totally 422 hotels, and the main focus will be on those hotels which have more rooms, guests and restaurant. 131 hotels out of 422 have less than 25 rooms. Thus, the samples will be among rest 291 hotels. However, not all 291 hotels have restaurant therefore the population will be less than 291. (At this point, it is hard to determine statically the exact number of research population because not all hotels have registered their information about their restaurants and food services system; it is considered that 4 and 5 stars hotels have restaurant but for the rest, it is necessary to contact them directly).
The interview and questionnaires will be conducted and done by, the manager of supply chain department, the head of purchasing or the CEO.
5. Limitations:
The research focus is on the hotels in Vienna and the result will not be generalizable to the other states of Austria.
Furthermore, although statically the research population is around 250 hotels, but still it is possible that some hotels deny to have an interview. The current situation of COVID-19 makes the situation even worse because people prefer to keep their distances as much as possible and in addition due to the COVID-19 some hotels have faced financial problems or bankruptcy as the tourism industry in Austria is weakened since March 2020.
The time is the other constraint, which can limit the gained information during the interview. For each interview, one hour is considered but there will be some cases, which need more than one hour for answers, clarification and going through the details to prevent misunderstandings.
In addition, although the interview will be recorded and will be analyzed by computer program, Nvivo, but still it will be unavoidable that it is harder to gain a certain degree of subjectivity from qualitative researches than quantitative researches.
