Hospitality Industry 4.0

There is no denying that supply chain functions?have become critical business operations over time since adequate research has shown a significant impact of supply chain function on firm costs and profits.?At the most fundamental level, the supply chain is the flow of information and material movement in both directions?inside a manufacturing or service organization. Supply chain management is nothing but control of the very process. Suppliers, manufacturers, wholesalers, transportation and logistics providers, and retailers are all essential participants in any supply chain,?and supply chain?activities?range from obtaining raw ingredients to shipping completed products?on time to customers. However, a corporation's competence to coordinate and interact among all supply chain stakeholders in a dynamic network of business communications is crucial to its success in today's competitive business environment.

Supply chain management?has often concentrated on increasing production and decreasing costs. Despite the fact that these requirements haven't changed, the consumer?now has become a priority in a supply chain. As the adage goes, user experience "survives and thrives in the supply chain."?Henceforth, today, customer satisfaction has become the ultimate priority of a supply chain which is a function of supply chain?performance in an organization. Ever-changing customer demands today call for a dynamic supply chain management system that has been made possible with innovation in technology.

Given the rapidly expanding business environment across various geographies that are forced by evolving consumer behavior patterns and demands on the one hand and growing competitiveness on the other, companies today have become a part of hybrid supply chain networks and are becoming more and more influenced by AI and IoT. According to a study on Industry 4.0 technology by Schrauf and Bertram (2016), the industrial revolution is advancing swiftly and almost every phase of the manufacturing process is impacted by sophisticated information-communication technology. Due to the increased emphasis on service quality and customer happiness, several service managers have made changes to improve SSC performance.

Speaking of the service supply chain (SSC) can be described as a dynamic network made up of suppliers, carriers, consumers, and other relevant parties that trade the resources needed to provide services, transforms those resources into primary and auxiliary services, and then offers those services to consumers. Hospitality procurement?focuses on the acquisition of goods and services for the restaurant, hotel, and lodging industries. According to a study by Medius (2021), procuring raw items,?contract discussions, negotiations, and payment are the four?main components of any hospitality procurement.

According to a recent study by Garcia (2019), poor procurement management is to blame for 80% of issues with undersupply and 30% of issues with product quality. This increases the risk associated with the procurement process. A report by Economic Times illustrated that the cost of procurement can account for 70–80% of the total cost of the hotel. The report highlighted that more than 50% of the hotel's sales revenue goes toward the procurement of supplies, facilities for guests, and other things required for hotel operation. The enhancement of hotel profitability and market competitiveness are both impacted by the lowering of the hotel's procurement costs. The hotel's ability to govern itself is directly impacted by the effectiveness of its procurement, which is a crucial aspect of everyday operations. both at the management and service level.

According to a study by Nicoletti (2018), P1, or procurement 1.0, encompasses all the fundamental operations and activities that are employed to manually deliver the items demanded by the customers to the customers within the requested timeframe. P2, or procurement 2.0, can be defined as an evolution of integrated purchasing services. Furthermore, P3, or procurement 3.0, is based on P1 and P2, but mostly revolves around building supplier relationships in order to avail better contract deals.

In order to create supply chains that are data-driven, connected, and resilient to boost supply chain performance, emerging technologies are used to help with decision-making at all stages?of supply chain planning and scheduling. ICT use and Industry 4.0 can enhance organization and supply chain performance, as shown by the cases and published studies by Zhang et al. (2022).?Industry 4.0 technologies such as IoT have demonstrated the ability to provide real-time visibility and information availability. Furthermore, intelligent devices aid in lowering labor costs and are more responsive to critical situations and unprecedented events.

Choosing the appropriate price to pay suppliers in return for the needed supplies is one of the key components of the procurement process. In order to achieve efficiency and the necessary efficacy in the procurement process, it is crucial to evaluate and estimate prices. The purchase manager is responsible for taking into account many cost-dependent factors because pricing is a key factor in choosing vendors and giving them orders; in these circumstances, simulating potential scenarios to predict an ideal price is essential to streamlining the procurement process. In order to identify the best price solution, using Industry 4.0 technology helps simulate situations. For instance, while deciding which vendor to choose, transportation routing algorithms believe it reasonable to take into account the distance between the consumer and seller. Additionally, contracts powered by blockchain technology, such as smart contracts increase the efficiency of the purchase process.

The Deloitte Report (2022)?states that cloud products like SAP IBP, Kinaxis, and SAP Ariba can provide the best planning and procurement options. Additionally, combining AI with game theory based on machine learning can offer the best possible cost-management strategy for purchasing and inventory expenditures. Furthermore, the book ‘Integrated Business Planning’ discusses how the demand sensing algorithm in the SAP IBP module can make forecasting for short-term horizons easier. In addition to this, lowering elements like carbon footprints is the need of the hour, and cloud networks can be leveraged to construct sustainable procurement.

There is no getting around the fact that procurement processes have direct and indirect costs, and those expenses can have a big impact on how well operations are run. Thus, a conceptual model has been developed (as illustrated above) by the author to explore and establish the relationship between variables that has the potential to affect service quality and customer satisfaction in the hospitality industry.

To what extent do you agree with the conceptual model?

Please let me know in the comments below.

~ Disha Roy Chowdhury

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