The Sunny Hotel

Discussion Questions

Summary of the Case

The Sunny Hotel is famous in Turkey. Mr. and Mrs. Gunes own the business that started in 1995. Five years later, a tremendous business growth started and continued for six years. The main reason for this success lies in the outsourcing of services the hotel cannot offer. The outsourcing of services falls within the purchasing department, and for this reason, purchasing process is strategic for success in the tourism industry. Upon recognizing this vital aspect, the hotel owners hired Mr. Murat Var as the purchasing manager. Mr. Murat, a master’s degree holder in business, has initiated a variety of changes. The consolidation of purchases to a single department has elevated the Sunny hotel to a success when their business rivals are facing various challenges.

The purchasing department at The Sunny Hotel not only deals with sourcing of materials but also services. Some of the outsourced services include security, cleaning, and animation among others. The consolidation of materials and service purchases to a central place has increased customers’ satisfaction and reduced costs significantly. However, there are several limitations to this process. There are instances of inappropriate selection of suppliers and failure to include departmental heads in the selection process.

Differences between Procurement Services and Purchase of Goods and Materials

There are marked differences between the procurement for services and that of goods. Firstly, most service providers are small scale unlike those supplying goods and materials. This feature makes most purchasing managers to limit the award of contracts to small firms that do not deliver quality services as desired (David, Sheila, & Richard, 2011). Secondly, unlike firms providing goods and materials, there are numerous firms offering similar services, this makes bidding process very competitive. Thus, the purchases managers deal with overwhelming number of bidders for a single service. Thirdly, most firms only purchase the services they cannot perform internally. This usually creates a scenario where most workers in a firm perform similar tasks along side those workers from the service providers. Consequently, there are conflicting interests, bad faith, and poor output.

Fourthly, in most cases involving the purchase of goods and materials, the item specifications, with exceptions of minor amendments, are prepared without the collaboration with the service providers. Moreover, similar product specifications are applicable in several instances of purchase. In the purchase of services, the service specifications are contract-oriented and suited to the circumstances (David, Sheila, & Richard, 2011). Additionally, the preparation of these service specifications requires joint approach from the technical and the contracting teams. The fifth difference relates to considerations when awarding the contracts. Unlike the purchase of goods and materials where prices and quality get more weight, in the purchase of services, more weight is on the technical standards and experience, with prices having the least of priorities. Contracts for the provision of services mainly go to the firms with desired technical qualifications.

Alternative Services Available to the Sunny Hotel

There are numerous services available to The Sunny Hotel for purchase. These services include but not limited to stewarding, ownership vacation housekeeping, general hotel maintenance, management of hotel facilities, management of laundry, parking services, bookkeeping services, and hotel management.

Advantages and Disadvantages of Centralized Purchasing Services

The centralized purchasing offers the logical way to improve efficiency and cut costs. These benefits accrue in several ways. Firstly, there will be no duplication of efforts. This will enable the firm not to employ the workforce that it does not require and thus maintain efficiency. Secondly, most members in the departments and managers of various offices will not concentrate on purchasing duties, but on their proper areas of operation. This increases productivity in the firm (International Purchasing and Supply Chain Management Institute, 2013). Secondly, centralized purchasing utilizes specialization as the firm can employ the specialized services of the purchases staff. The third dimension of centralized purchasing relies in the large quantity buying that improves the bargaining power of the firm. Additionally, buying in bulk attracts better discount and even eliminates the use of intermediaries. Lastly, centralized purchasing involves lowering of costs. The minimum inventory records will lie at a central place. Moreover, receiving huge supplies from a single supplier reduces the cost of transport.

However, there are some disadvantages associated with centralized purchasing. Firstly, failure to meet the detailed needs of various departments causes dissatisfaction and low morale from the various departmental members. Further, the purchasing team may not be familiar with nearly all the departmental requirements (International Purchasing and Supply Chain Management Institute, 2013). Lastly, delay in the delivery of goods to the various departments may result in further inefficiency.

Supplier Selection and Evaluation Criteria

According to Benton (2012), the common techniques used in the selection and evaluation of suppliers are either performance-based or process-based (p.29). This paper will examine the performance-based method. The performance-based method has three basic parts: the categorical, cost-ratio, and linear averaging.

The categorical method groups suppliers in various performance areas (p.30). These areas include cost, service quality, and speed. The performance levels ranges from good, neutral, and satisfactory. The cost-ratio method calculates the cost of service purchase from the selling price and the additional internal costs incurred by the buyer such as delivery and quality. The last technique, linear averaging, involves evaluating the service supplier in areas such as quality, service, and price (Benton, 2012 p.33-35). Some of these factors may have more weight in the scorecard. However, as a consultant the categorical method is the best option for Sunny Hotel. This method, unlike the other two approaches, is simpler and does not involve many calculations.

References

Benton, W. C. (2012). Purchasing and supply chain management. New York, NY: McGraw-Hill.

David, B., Sheila, P., & Richard, P. (2011). Proactive purchasing in the supply chain: the key to excellent procurement. New York, NY: McGraw-Hill.

International Purchasing and Supply Chain Management Institute. (2013). Advantages and disadvantages of centralized purchases. Retrieved from, http://www.ipscmi.org/tipsandsolutions/servicesupply.php.