Discuss about the Purchasing Management for Singapore International Hotel.
This essay discusses the purchasing management of Singapore International Hotel located at the heart of the city. The essay will focus on analyzing the efficiency of the features of purchasing management; that is the criteria for supplier selection criteria issues related to it, and recommend appropriate criteria to be considered; use of information and communication technology for purchasing procedures and discuss on issues of purchasing costs analysis. At the end of the essay, a summary will be outlines on the key points derived from the analysis of the three aspects discussed.
Singapore International Hotel is a five star hotel offering services in the hotel sand hospitality industry. It serves both local customers and international customers who come to Singapore for business or as tourists. The hotel offers a range of services to its customers including boarding and meal services, recreational facilities and conference facilities to its clients. The hotel has various branches located in other localities in the country. Our supplier market has a wide range from those supplying products to those who offer services to the hotel. The products suppliers provide goods such as vegetables, meat and meat products such as beef, mutton, pork, and chicken meat among others, beverages, milk and a range of food stuff. The service providers include those who provide car/bus hire services to our client and internet providers. Our main competitors are other five and three star hotels within the city who offer more or less the same services as we do. Our organizational goals are to provide the best hotel experience for our local and international customers. The organizational strategies include ensuring that there is customer satisfaction through provision of services that meet the expectations of the customers and making sure that we improve on our services on a day to day basis.
Selection of supplier is among the utmost critical parts of the procuring role of an organization (Florez-Lopez, 2007). It is a tactical choice when the procurement department wants to form lasting relationship with its suppliers where they both benefit. Firms are becoming progressively more reliant on suppliers to provide the services and supply products. The process of selecting suppliers is a crucial area that needs to be addressed for a better purchasing process (Ying, 2000). Selecting the right decision making criteria together and correct method for making decision is critical in finding the correct suppliers.
The assessment of supplier encompasses ranking the value of the supplier by gauging the supplier’s competence and performance. For supplier selection, there is a clear set of criteria by those making the decision to assess the efficiency of potential contractors in the earlier and present contracts. It assists those making the decision to position by ranking the suppliers they prefer.
There are issues that are encountered when selecting suppliers. These issues include increase in the number of suppliers, challenges in identifying and defining the selection parameters for the suppliers. On occasion, the decision-makers have to make decisions using data that is incomplete. The matter of the number of suppliers is used for apiece item bought is also another problem (Wisner et al., 2005). When using a single sourcing approach, suppliers are measured as able to satisfy the purchaser’s requirement (Xia and Wu, 2007). Buyers just make one choice on who is the best supplier. Multiple sourcing requires the buyers decide who the top suppliers are thereby the size of purchase request to be given to every one of the selected supplier.
The recommended supply selection criteria for the organization are briefly discussed below. The prevailing factors when considering any suppliers are price, quality and delivery. Suppliers need to be in a position to meet specifications for quality and have a stated schedule for delivery at a price that is reasonable. The other factors for selection are professionalism, commitment, integrity, economic and political situations, flexibility and reliability
Geographical location is also used as a criterion for supplier selection since it would define if the purchase management will involve a resident or international dealer. This is especially important if having business with foreign vendors particularly with issues of tariff and trade barriers.
Performance and capability are the two important measurements of the ability of the suppliers (Sarkar and Mohapatra, 2006). Past performance of suppliers is also used to evaluate the suitability of the supplier and this is used as a reference line to avoid any supplier who does not perform being given any contracts in the future. The selection criteria for suppliers also include the way the supplier’s firm is managed and organized; the organizational arrangement and attitude of the management provides the purchaser a guarantee of its sustainability. Also the financial status of the supplier must be evaluated since a good fiscal situation of the provider assures the purchaser of the sustainability of the provider through the entire period of the projected supply.
Currently, increasingly additional food provision processes have been computerized by using computers. Purchasing computer system lets firm to improve organizational power in terms of spending and regulate the processes of purchasing. Procurement software aids the hotel by decreasing inadequacies and needless expenses associated to methods of purchasing.
An information and communication technology (ICT) system than is well-functioning can aid firms to the achievement of maintainable competitive advantage. It can aid firms improve the quality of their product and service while reducing the cost at the same time. The hotel industry sector product is perishable and has to be consumed when it is set to be served; hence the services should be provided at the same time with the demand. The strong competition in business setting today shows that the hotel businesses must work harder to keep and grow their competitiveness. A good information and communication technology system aids a hotel firm to classify its relations with its most essential suppliers. It offers the users with established built-in monitoring tools to aid regulate expenses and guarantee full performance of the supplier. It offers a structured system to retain an open communication line with prospective suppliers during a purchasing process. The ICT system permits purchasing managers to confirm the price setting, and control earlier contracts to guarantee every new pricing quotation is more competitive compared to the last quote.
Therefore the hotel can achieve tremendous benefits from IT. Computer applications increase the competitive advantage of the hotel relative to the competitors. IT also gives the hotel an opportunity to become independent of mediators and promote its own facilities. It enables the hotel advance the quality of services they provide (Baines, 1998). Through Computer applications, the business of the hotel is open for 24 hours a day at the lowest cost. Many of the hotel’s purchasing processes are automated by use of computer applications.
The advent of the internet has given the purchasing departments of hotels an opportunity for reducing costs and improving their services such as ability to pay invoices electronically, and be able to respond to suppliers problems well. The relationship between the supplier and the purchasing department is also improved through the use of internet by improving communication between them.
Some of the concerns associated with the use of IT fully by hotels are the lack of IT knowledge and experience, absence of training, lacking financial resources. The other major barriers to adoption of IT by firms are restricted access to principal funds, inadequate applications of technology proficiency and absence of trade and computer technology strategy (Mark, 2001). The purchasing departments need to be run as per the type of the goods or service that is provided (Fisher, 1997).
The purchase department need to adopt the E-procurement since it has several benefits such as cost reduction through different ways as improvement in the internal efficiency, cutting down supplier cost, order error rate reduction and minimize excess purchasing (Croom and Brandon-Jones, 2007).
The Hotel needs to do cost analysis to ensure that we do not spend much money on acquiring goods or services from the suppliers. Cost analysis is done whenever a fair and reasonable price is not given by the price. Cost analysis aims at assessing if the cost of the supplier is on track with soundly inexpensive and effective performance ought to charge. The means of conducting cost analysis is the cost data given by the supplier. It offers actual information on the costs the supplier states might be used in executing the contract (Dumond, 1994).
Cost analysis methods are used to divide into components such as equipment, labor costs, materials’ costs and overhead of the supplier to confirm and assess each constituent. These costs can be used to compare it with the costs that were actually earlier incurred for related work; what other suppliers have availed and independent breakdown of cost estimation (VITA, 2016).
There are some criteria the purchasing manager uses to prove that the price the Hotel is paying is reasonable and fair. These criteria are; (1) if the hotel is getting some type of discount, (2) if the hotel is being charged the same like the supplier would charge another hotel, (3) to check if the price charged currently compare to what was charged for same service or goods.
Cost analysis is performed any time no competition in price exists. It is done when discussing a contract with one supplier who is the sole supplier of the goods or services. Cost analysis is also carried out if in the course of a competitive closed bidding the procurement team receives only a single bid that is considerably different from the hotel’s independent estimation of the agreement charge. A breakdown of the cost from the single supplier is then attained, analyzed and the reasonableness of the price is determined (VITA, 2016).
The recommendation for the hotel is to use the different tools for assessing if the prices offered by the suppliers are fair and reasonable. These tools are; (1) Price competition: When the hotel receives more than one offer that are acceptable and the prices that is the lowest is selected, then the lowest bidder price is presumed fair and reasonable. A very low price need to be counter-checked to make sure that the supplier knows what he is vending no errors was made, (2) Market prices: Where a good or service has an well-known confirmation of an equivalent or lesser price, the price is considered fair and reasonable and (3) Historical prices: when the hotel has been buying the good or service for some years, the information is used to conclude if a price is fair and reasonable.
Conclusions
There is need to carry out a thorough selection of the suppliers who will be used to supply the goods and services needed in the hotel. The availability of different criteria for doing the selection need to be used to come up with the right combination of criteria that suits the hotel industry. Using IT in the hotel purchasing department is crucial to ensure the flow of data and the relationship between the suppliers and the purchase department. This will ensure profitability and cost cutting for the hotel. The purchasing manager and procurement team need to analyze the cost or the price the hotel pays the services provided and goods delivered. Fair and reasonable price is not automatic from the offer that is the lowest. Price analysis or cost analysis is done to asses if the price is fair and reasonable.
References
Baines, A. (1998). Technology and Tourism. Work Study, Vol.47 No. 5, PP. 160–163.
Croom, S. and Brandon-Jones, A. (2007), Impact of e-procurement: experience from implementation in the UK public sector.
Dumond, E.J., (1994), Moving toward value-based purchasing, International Journal
Fisher, M. (1997). What is the Right Supple Chain for Your Product?. Harvard Business Review, PP.105–116.
Florez-Lopez, R. 2007. Strategic supplier selection in the added-value perspective: A CI approach. Information Sciences, 177(5): 1169-1179.
Mak, S. (2001). A Model of Information Management for Construction Using Information Technology, Automation in Construction. Elsevier, UK, Vol.10 No. 2, PP. 257–263.
Sarkar, A. and Mohapatra, P.K.J. 2006. Evaluation of supplier capability and performance: A method for supply base reduction. Journal of Purchasing and Supply Management, 12(3): 148-163.
VITA (2016). IT procurement policy manual. Chapter 09 – Determining Fair and Reasonable Pricing – V3.0 2016
Wisner, J.D., Leong, G.K. and Tan, K.C. 2005. Principles of supply chain management: A balanced approach. USA: South-Western, Thompson.
Xia, W. and Wu, Z. 2007. Supplier selection with multiple criteria in volume discount environments. Omega The International Journal of Management Science, 35(5): 494-504.
Ying, F. 2000. Strategic outsourcing: Evidence from British companies. Marketing Intelligence & Planning, 18(4): 213-219.
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