Hospitality Supply Chain Management: Principles and Strategies Report

This report delves into the intricacies of supply chain management (SCM) within the hospitality sector, using McDonald's as a case study. It begins by defining SCM, outlining its core principles and processes across resourcing, product design, development, logistics, and distribution. The report emphasizes the importance of effective SCM from the perspectives of customers, suppliers, distributors, and retailers, highlighting cost reduction, improved customer service, and on-time delivery. Furthermore, it explores the cross-functional and integrated approach of SCM with other functional areas within a hospitality organization. The report concludes by examining supply chain strategy and proposing improvements, aiming to enhance efficiency and profitability within the hospitality industry. The analysis covers planning, procurement, production, distribution, and customer interface, emphasizing the need for strategic alignment and technological integration.

Hospitality Supply
Chain Management

Table of Contents
TABLE OF CONTENT..............................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Concept of supply chain management, principles and process are applied throughout the
stages of resourcing, product design, development, logistics and distribution...........................3
TASK 2............................................................................................................................................6
P2. Importance of effective SCM from the perspective of customers, suppliers, distributors
and retailers.................................................................................................................................6
TASK 3............................................................................................................................................7
P3. Cross functional and integrated approach of Supply chain management with other
functional areas...........................................................................................................................7
TASK 4............................................................................................................................................9
P4. Supply chain strategy within the hospitality organisation and present proposals for the
improvement...............................................................................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Supply chain management refers to the flow of goods and services in an organisation and
also responsible for all the production process and their requirements. This is the important
factor in the organisation as it manage all the production related activities like farming,
manufacturing and packaging of goods. (Zhao and et. al, 2016). The main component of supply
chain management are planning a source, manufacturing of goods , delivering products and
return on investment. McDonald's is a n American company, which deals in best quality of fast
food. Its headquarter is in Oak Brook, Illinois. It is the largest chain of restaurant in the world
and earn highest revenue. No. of customers for the McDonald's are more than 50 million in
different countries. This is famous for its hamburgers and French fries. This report explains the
concept of supply chain management, concept and their principles which are helping in different
stages of procuring the product, development and distribution. Further, it will explains the
importance of effective SCM and their interrelationship between hospitality sector.
TASK 1
P1. Concept of supply chain management, principles and process are applied throughout the
stages of resourcing, product design, development, logistics and distribution.
Concept of supply chain management: It is the process of flow of good and services in
an organisation, which also deals with the planning, procuring, manufacturing, packaging and
transporting the final product. (Yanamandra, 2018).The main focus of supply chain management
is to control and minimising the manufacturing cost. This concept is used by many organisation,
McDonald's can also use this practice in order to provide good quality product to their
customers. Supply chain helps in product development and designing of product and their
distribution. For example, If any organisation uses this techniques, it will hep the company to
make better use of its machine and produce superior quality goods. McDonald's uses this
technique and control all the factor of production and investing their money in right product.
Process of supply chain management- There are various factors that impact the process of
supply chain management in the organisation. This process will helps in controlling the supply
chain aspects. McDonald's uses various supply chain techniques, which helps in maintaining a
good manufacturing process and the process is explain as follows:

Planning- This is the first step of Supply chain management, which focuses on short
term and long term action plans for the organisation. Company should focuses on advantages and
disadvantages of different aspect in the international market. It also involve the Outsourcing of
manufacturing process. It is the mapping of manufacturing facilities and storage area for the
goods. McDonald's can do better planning to build a strong supply chain network that can help in
effectively analysis of good and make sure their fast delivery to their potential customer.
Procurement- This is the process which involve the purchase of raw material and ensure
that sufficient raw material should be purchase, there is no wastage of raw material.(Thunberg
and Fredriksson, 2018). With this organisation can control the various aspects of management
that will help in better choice of product and reflect the buying behaviour of the organisation.
Production- This is the process which includes the manufacturing, designing and
collecting the material. Supply chain manages ensure that all the needed material will be
available for the production of goods on time. In McDonald's, manager ensure all the
requirement of raw material and control the wastage of material. Company provide products
according to the customer needs and wants.
Distribution- This factor includes the channels of distribution of goods and services.
This ensures the proper logistics of the firm and McDonald's uses transportation company as a
their party payroll for delivery of goods and services. This company sell its product via
wholesaler, retailer and sales persons.
Customer Interface- This is the last step of supply chain management process, which
involve the concern of customer satisfaction. It focuses on identifying the problem associated
with the planning, procuring and manufacturing of goods and services.(Tamayo-Torres,
Gutierrez-Gutierrez and Ruiz-Moreno, 2019). McDonald's provide best quality fast food to their
customer as per the preferences of the customers and if there are any problem related to the
product and customer is facing issue then company can directly contact to the customer through
nay medium of communication.
From the above discussion, It is analysed that supply chain management of the
McDonald's can do better planning of what is needed for the customer and from which
techniques it can be accomplish in a better way. It the company properly execute the supply
chain process, it will help in saving the resources and produce a goods in a effective manner. It

also helps the manager to have control over inventory and create better relatioship with the
customer. With the proper allocation of resources, company can earn maximum profit and
sustain in the market.
Principles of supply chain management
There are seven factors that effecting the supply chain management to work in a efficient
way and control the different aspect of the business in order to maximise their profitability and
they are follows:
Principles 1- Supply chain managers should understand their target audience and
identifies their needs and wants and then do segmentation of the customers according to their
group. (Soni and Kodali, 2016).Same in McDonald's, company analyse the prospective customer
and then manufacture the product. Like company offer veg. Food items and non-veg. Food items
in order to satisfy the different segment of the customers.
Principles 2- When, manger identifies the needs and wants of the potential customer and
manufacture product accordingly, then manager choose the channel of distribution for delivering
goods and services in a short period of time. McDonald's uses various medium to deliver their
product and established a good network of supply chain through which company can deliver
their product in short period of time.
Principles 3- This principles suggest that, supply chain manager should be trained for the
different activities that how manager can share their information about the process of production
and eliminates the unnecessary stock. (Singhry and Abd Rahman, 2019).McDonald's share their
progress and aspect of business to trading partner and stock the product that are in demand and
ensure high sale.
Principles 4- In this principle, The company is making changes in their existing product
because international market is not liking the product and it effects the sale of that product. With
the help of product differentiation, consumer will like the product and company have
conversation with the customers with the help of effective supply chain. McDonald's
manufactures the product according to the need of the consumer.
Principles 5- This principles explains the sources of supply strategies or with a effective
work plan. McDonald's is using this concept and increasing the efficiency of supply of product,
which help in minimising the overall cost of material.

Principles 6- For smooth running of business at every level of management, company
needs technological plan in supply chain. (Mehrjoo and Pasek, 2016).McDonald's follow all the
code of conduct in order to full fill the proper strategies regarding the use of technology for the
product.
Principles 7- this action is based on costing for the monitoring the consumer's net profit.
McDonald's is using activity supported costing, which is helping the organisation in
determination of profitability.
TASK 2
P2. Importance of effective SCM from the perspective of customers, suppliers, distributors and
retailers.
Supply chain management is important factor in the organisation at it give a way to
perform a various action plans. It is helpful in identifying needs and wants of the customers and
it is the inherent part of the organisation which contribute in successful running and growth of
business. If there is a effective supply chain management in the organisation, then this is easy for
the companies to deliver their product in a short period of time. It makes less investment in the
manufacturing of goods and services. There are some points that explains the importance of
Supply chain management are follows:
Reduce operating costs
Decrease purchase cost- Organisation do fast delivery of the product, that are expensive
or can say that are costly will be deliver first in a short period of time. (Luo, Shi, and Venkatesh,
2018).This is because, expensive goods contributes maximum part in the revenue. For example,
if there is a high customer demand in the organisation then it will reflect the sale of the company,
which minimize the inventory cost. Retailers are also depends on the supply chain so that
company will deliver their product and then they will get the products on time that reflects the
requirement of targeted customer.
Decrease production cost- Effective supply chain management help in minimising the
delay in the production of the goods and eliminates that increasing cost of products. This is the
important factor that affect the overall profitability of the company. Customers will receive

product on time by delivering the product on time. It will help the organisation to reach it
potential customers.
Improve customer services
Right quantity and quality- With the effective supply chain management, organisation
can manufacture product of good quality and effective quantity. SCM is the important factor that
effecting the market and is a important part to make change in the product. People are likely to
have good quality product, so it is necessary to have effective SCM. With the good management,
company can purchase better quality product with advance technology. This makes better quality
product and satisfy the needs of customers.
On time delivery- By implementing the Supply chain management, product manufacture
in short period of time with the sufficient availability of the raw material and cover large market
at a point of time(Ivanov and Dolgui, 2020).An effective supply chain helps in avoiding various
problem that are associated with the product and ensure that the product will reach to the
customer on time. For example if the company implement supply chain management in a
effective manner, then Product will deliver within a time frame.
Services- There are various issues that are arises with the sale of the product. If there is a
effective supply chain management in the company, It makes easy delivery of the product to
retailers, suppliers and distributors within a set time frame. With the proper execution of supply
chain management, company can build their potential customer and can influence them to stick
to their brand only and company will meet the needs and demand of the customers.
From the above discussion, It is analysed that supply chain management play vital role in
the proper and smooth running of business. Company can provide a better quality product to
meet the needs and choices of the potential customers. It will also help in identifying the
requirement of the customer and than manufacture the product accordingly. With the full control
over the market, company can earn maximum profit and decrease their production cost. This will
also helps in delivering the product on time.

TASK 3
P3. Cross functional and integrated approach of Supply chain management with other functional
areas.
There are various department, which play important role in successful running of an
organisation, They perform strategic planning for the easy formation of goods and service.
Supply chain management play important while developing a new product, when existing
product is outdated and are not in demand (Gomezelj, 2016)Then SCM, gives a plan of action
that how to design product, collection of raw material, manufacturing of products and
transportation of the product.
Supply chain management helps the company to find new ways of innovation and can minimize
the operational cost of the company. There are many department that have interrelated with
supply chain management and the function of the organisation. Interrelationship of function with
other department of the company in context of McDonald's are follows:
Purchasing department- This is the first department, where supply chain management
plays important role in purchasing of raw material to manufacturing of final product. In
McDonald's, there is direct relationship with the purchase department, as firm can purchase the
raw material for manufacturing the good or services that5a meet the expectation of the potential
customer. Purchasing department is also responsible for the buying a adequate quantity of raw
material with the proper inspection. It help in maintaining coordination with the supplier in
proper flow of raw material.
Operational department- Organisation is aware about the need and wants of the
customer with the help of this department. Before giving the order for buying raw material, the
operational department help in identifying the needs and wants of the customers. This
department I well aware about the market requirement and which product can effect the
profitability of the organisation, so goods are manufacture in a fixed quantity to avoid the
wastage and extra cost of production..(Bulsara, Qureshi and Patel, 2016).If the company
manufacturing the goods more than required it will effect the operational cost of the company.
This also help in inventory management, production and delivery of the products.
Logistics function- This is related to supply chain management as company require
medium to have control over the factors of transportation the commodities. Company is able to
deliver their product with the help of logistics department. This department provide a effective

transportation and storage facility with the help of supply chain management, so that finished
goods can reach to the customer safely and without damage.
Resource management function- This is the important factor that helps the supply chain
management to procure the various sources of raw material, technology and labour. For the
delivery of the product, this department play important role in delivering or providing right
product at time. It also help in minimizing the cost of operation or procuring the resources. With
the better use of supply chain management, products can be manufacture by the utilization of
natural resources and fulfilling the consumer needs. If company is able to satisfy the consumer, it
will helps in increasing the maximum profit out of available resources.
Information workflow- If the organisation do not have the right information about the
needs and wants of the customer then they will not satisfy the potential customers and of result,
organisation will do extra production and increases the production cost for the company and
effect in a negative way. This will leads to misleading of the organisation in a wrong pathway.
Hence, by getting right information, firm will able to produce the goods and services according
to the needs and wants of the customers.
As of the discussion, It is analysed that supply chain management have vital relationship
with the other departments for the easy and smooth flow of organisational activity. With the
contribution of above department, firm will able to manufacture goods in a appropriate quantity
and of good quality with the help of various resources. Organisation will not able to produce
these product, if these department do not have significant role in it. If the operation department
give the raw material requisition, without monitoring the exact quantity. It will effect the supply
chain management and their productivity and also impact negatively on the organisation.
TASK 4
P4. Supply chain strategy within the hospitality organisation and present proposals for the
improvement.
McDonald's is working on global basis and have good supply chain management. It helps
the organisation to work in a efficient and effective manner with the adequate plan of action.
Change in the taste and preferences of the customer will effect the supply chain management.
Company will do the operational activity in order to meets the need and demand of the
customers. The management of the company analysis the market demand for the product and

then manufacture the product, It will help in minimising the cost of productions and also
eliminates the wastage of raw material and other resources. For example, People are more likely
to have superior quality products and for this, management is uses TQM concept and its
technique for doing this and having control and manage the quality of the goods.
McDonald's is using various strategies and action plan for better accomplishment of the
supply chain management in various aspects like inventory management, supply planning,
demand forecasting and many more(Boone and et. al, 2019) Company can manage the cost of
inventory by using inventory management and for this company needs to forecast the demand of
goods and services that have to be sell in the market. Another factor is supply planning, this is
useful in the organisation, when company is facing issues regarding insufficient supply of raw
material and other resources. Company will able to provide a sufficient quantity of goods with
the use of supply planning strategy in the organisation with the effective management of
transportation, packaging and distribution of the goods and services. Another factor is purchasing
planning, this is the problem is faced by the company when planning to purchase a raw material
or made a wrong choice of purchasing. With the effect of strategic purchasing, company will
able to purchase the required quantity and effective choice of raw material or factor of
production and last factor is visibility and co-ordination with the other department. This is the
useful for the organisation, it facing the lack of production and supply, So by this technique,
organisation will able to this technique to make proper supply chain network and manager will
focuses on purchasing of raw material, market demand etc.
Different plan of action can be used for the improvement in the support system of the
organisation. These actions includes the vendor performance and distribution channel.
Organisation is aware about the vendor life cycle and their rates. By using just-in-time, concept,
company can increase the inventory turnaround and decrease the inventory cost. Streamline
accounting can be another tool which help in better supply chain management. It helps the
organisation in minimising the paperwork and invoice ups. With this, organisation can decrease
the payment process.

CONCLUSION
From the above report, it is concluded that supply chain management helps the business
in choosing the best factor of production and utilizing them, in a better way. It ensure the
effective transformation of product from available resources. This help in enhancing the value to
the customer and with the various principles and process of this management, organisation can
sustain in the market. There are various concept and stages of supply chain management with
different channel of distribution. All the discussed department play important role in easy flow of
supply chain management. With the full support of purchase department, operational department
logistics function and resource management function, supply chain management will work
effectively in context to McDonald's. It helps is achieving profit and growth of the organisation.

REFERENCES
Books and Journals
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data era. International Journal of Forecasting, 35(1), pp.170-180.
Bulsara, H.P., Qureshi, M.N. and Patel, H., 2016. Green supply chain performance
measurement: an exploratory study. International Journal of Logistics Systems and
Management, 23(4), pp.476-498.
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tourism. International Journal of Contemporary Hospitality Management.
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and resilience in the era of Industry 4.0. Production Planning & Control, pp.1-14.
Luo, W., Shi, Y. and Venkatesh, V.G., 2018. Exploring the factors of achieving supply chain
excellence: a New Zealand perspective. Production Planning & Control, 29(8), pp.655-
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Singhry, H.B. and Abd Rahman, A., 2019. Enhancing supply chain performance through
collaborative planning, forecasting, and replenishment. Business Process Management
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Soni, G. and Kodali, R., 2016. Interpretive structural modeling and path analysis for proposed
framework of lean supply chain in Indian manufacturing industry. Journal of industrial
and production engineering, 33(8), pp.501-515.
Tamayo-Torres, I., Gutierrez-Gutierrez, L. and Ruiz-Moreno, A., 2019. Boosting sustainability
and financial performance: the role of supply chain controversies. International Journal
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Thunberg, M. and Fredriksson, A., 2018. Bringing planning back into the picture–How can
supply chain planning aid in dealing with supply chain-related problems in
construction?. Construction Management and Economics, 36(8), pp.425-442.