hotel managment tis

7/28/2019 Hotel Managment TIS

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Contents

Introduction ................................................................................................................................ 2

Definition of purchasing: ........................................................................................................... 3

Purchasing Policy: ..................................................................................................................... 5

Purchase request form: ............................................................................................................... 5

Purchase order ............................................................................................................................ 5

Various tools are available for inventory management: ............................................................ 6

Deciding on safety stocks and reorder levels and buffer stocks: ............................................... 6

Selective Inventory Control ....................................................................................................... 8

ABC Analysis ............................................................................................................................ 8

The Ordering Procedure ........................................................................................................... 10

Strengths ............................................................................................................................... 10

Weakness .............................................................................................................................. 11

Purchase Requisition ................................................................................................................ 12

Strengths ............................................................................................................................... 12

Weaknesses .......................................................................................................................... 13

The Purchase Order.................................................................................................................. 13

Strengths ............................................................................................................................... 13

Weaknesses .......................................................................................................................... 14

Problem .................................................................................................................................... 15

Internal Problem....................................................................................................................... 15

External problem ...................................................................................................................... 18

Conclusion ............................................................................................................................... 20

Sample Purchase Order Form .................................................................................................. 21

Sample Purchase Requisition Form ......................................................................................... 22


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Introduction

The objective of this report is to understand and improve the purchasing process of the hotel

Holiday Villa Hotel & Suites Subang. While doing industrial training in Holiday Villa Hotel

& Suites Subang hotel studied the purchasing cycle of the hotel which starts with needed

recognition, need specification, selection of the supplier, then order and finally receiving the

goods. This is the general purchase cycle which can be seen in almost all the hotels. All this

process cycle has few internal process and external process for example the need requirement

is inter department process in which purchase request form is filled by any department who

wants to purchase the raw material. The second step is filling of the purchase order in this

case the Hotel contact with the third party and the purchase order is given to the supplier. In

this purchase cycle emphasise is given on the ease and the speed of the purchase. But in this

process the hotel Holiday Villa Hotel & Suites Subang is incurring losses as discussed in

previous report. So here i have proposed the new system to overcome loses covered in the

process of procurement of the goods. I am proposing to outsource the process of the

procurement to third party. It will not only help in minimizing the loss but it also help us to

overcome the other problems like receiving and scrapping the raw material. The purchase

cycle will be bit different from the existing purchase cycle. First step of the purchase cycle

will be the same. It will include need recognition in this process all the department will fill

convey there need to the purchase department. It can be done by using the need recognition

form.

In the new purposed purchase cycle we can directly send the need recognition form to the

supplier. Then he will take of the rest of the steps which includes specifications of needs,

selection of the supplier, ordering the raw material and delivering it to the hotel. In this report

we have discussed that how it will benefit the third party (supplier).and how it can help us to

minimize the loss. We have also done swot analysis of the existing system as well as the new

system. Although this will be the new system but it has some problems. For example it is

difficult to find out such supplier who can take care of everything like need specification and

inventory management. So in this report we have discussed the problem faced in the previous

system and expected problems of the new system.


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Definition of purchasing:

Purchasing is nothing but acquiring raw materials, finished goods, services etc for the

organization to be able to do business and work towards the goals of the enterprise.

Purchasing may be slightly different from procurement since the later involves expediting,

supplier quality, and logistics in addition to purchasing.

In Most organizations a three way check process may be used for the purchasing process.

This involves three departments of the organization completing separate parts of the purchase

process.

These departments could be purchasing, receiving and accounts payable.

When the receiving department may not be present the process may be called as a two way

purchase order.

In the purchasing process mostly, the department in which the need for any particular item

arises, raises an indent which is duly signed by the department head. The indent is sent to the

stores department. If the material is available with the stores it is issued. If the material is not

present the stores sends the indent to the procurement department.

The procurement department in turn looks for a list of vendors.

The vendors of these items are numbered in order of preference based on vendor performance

experiences. Vendors can be selected based on the time of delivery, reliability, quality of

material supplied, cost quoted by the vendors for the materials etc.

In case a totally new material is required the purchase department would look for vendors in

the directory or online in World Wide Web and contact them. In such cases a minimum of

three vendors are selected and quotation for bidding process are asked after telling them the

material requirement.

Once the bidding Is done by the vendors, one of them is selected based on suitability and costadvantage and other criteria like lead time, reliability of supplier, past reputation etc. the

ultimate decision of the selecting the vendors lies with the company.

After deciding on the vendor a team may be sent to the vendor who will check on the process

used on the vendor site and approve of them before actually ordering the material form them.

If the material is required for immediate use then the same can be procured by local vendors

on emergency basis.

Vendors can be developed based in course of time to that they suit or quality requirements.

Many new practices like vendor managed inventory in which the vendors themselves keep


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track of the inventory or stock position at the customers place, and alsoCPFR in which

collaborative and planning and forecasting is done which is again in practice now a days as

these reduce the risk of stocking out of material and helps reducing inventory carrying costs,

with minimum storage spaces.

Use of just in time inventory management is again very useful as it drastically reduces the

inventory carrying cots and can meet ever changing customer demands very easily.

Also In case of perishables and eatables this technique becomes a must as the shelf life of

these items are very less.

Purchasing cycle: purchasing cycle may be defined as the routine timing when one

replenishes or raise regular orders from a particular supplier.

It may involve the following steps:

1. Recognize the items to be purchased, describe them properly and then define the needof it.

A. Classification Of Needs

1. What is the type of need

2. Is the need strategic or operational?

3. Is the need repetitive or non-repetitive4. What is the size (quantity; dollars)

5. What is the required speed/timing

B. Describe Specification Of Need

2. Transmit the need (requisitions)

A. Standard requisitions

B. Traveling requisitions

C. BOM requisition

3. Determine what the various sources are, investigate, and select supplier/analyze

bids

4. Prepare and issue the Purchase Order.

5. Follow-up the order (including expediting and de-expediting)

6. Receive and inspect the material (use of receiving report: purchasing, accounting,user, receiving)


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7. Clearance of the invoice and payment to supplieras has been described earlier

8. Close the order/records

Purchasing Policy:

Purchasing policy is nothing but HOW you order, or whatare the various RULES you

follow.

This might include Order Only (for a definite sale), Reorder Point, Maximum

Inventory, Set Order Quantity (eg: pack or pallet size), Average Demand / Forecast,

etc. There are many more. These are the ones I mainly use though.

Purchase request form:

Purchase request form is a form used to request merchandise, usually from a

wholesaler, manufacturer, or direct-mail retailer.

Purchase order

Purchase order is a commercial document which is used to request someone to supply

something in return for payment and providing specifications and quantities

A purchase order will contain a list all the items required and the quantities in whichthey are required. This purchase order will be sent to the customer. Based on the

purchase order the vendor will produce the required goods or give the required

service.

In case of goods, the vendor will send an invoice along with material giving details of

the quantity and type of material. The invoice is then checked at eh gate of the

customer and a goods received note ( GRN) is issued.


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Various tools are available for inventory

management:

1. SAP for bigger organization2. Excel spread sheets with simple formulas can be used in smaller organizations

dealing with lesser no of materials.

Par

t

no

Descri

ption

Monthly

Req.qty.

Per

day

req.

Ra

te

Buffe

r

stock

Safet

y

days

Safety

stock

Min

stock(H

+J)

L

t

R

at

e

Average

Stock

Value

A

B

C

1 a 10 13 1 12 1 A

2 B 2 141 1 12 2 A

3 C 21 15 1 23 1 A

3 D 23 51 1 12 2 A

4 E 34 21 1 34 1 A

5 F 54 31 1 12 2 B

6 G 764 41 1 34 3 B

7 H 34 51 1 21 1 B

8 I 23 12 1 12 2 C

9 J 23 12 1 12 3 C

10 K 12 12 1 12 1 c

Deciding on safety stocks and reorder levels and

buffer stocks:

Various systems are available to keep track of the same:


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Ideal system to keep minimum inventory on JIT Basis

Fig 1

In case where just in time material management is not possible we can use a system

like this.

Fig 3

M= m+ (l+R)*C

m = Z. c.(L+R) + Z. L. (L+R)

Max. Level

Safety stock

R1 R2 R3 R4 R5

Time

Inventory

Inventory levels

Time

Safety stock

Buffer

Re-order Qty

Lead Time

consumption


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Calculate lead time on basis of probabilistic model for 100 % service levels. Fix review period based on past demand data analysis. Fix daily consumption on basis of probabilistic model for 100 % service levels. Iterate the system (keep reducing safety stock & review time) till still zero stock out.

Selective Inventory Control

ABC Analysis

Every single dish needs certain raw materials to get prepared. The final list will contain

details like name of the finished good and the raw materials required for that particular good.

Data should be collected in the following format:

Name of the

product /dish

Raw materialname Unit ofmeasure

Quantity

required forone serving

Avg no. of

servings perday

Variance

This data should be collected over a one month period, for maximum effectiveness and

accuracy of data. This data should not be collected during a seasonal time like New Year etc.

Collecting data during such a time will not give us a real picture of the average consumption.

After collecting this idea we would have a fair idea as to how many times a particular dish is

being ordered by a customer on an average per day. We would then multiply this by the

quantity of this dish required for one single serving. This would then give us in quantitative

figuresthe units of that particular ingredient we need for serving the average number of that

particular dish for one day.

Of course now that ingredient will be repeated in several other dishes. So what we can do

now is add up the total requirement of that particular ingredient per day. Then multiply the

requirement into the price/cost of the raw materials.


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We then arrange the raw ingredients in the order of their cost per day. Then calculate the

cumulative value of the raw materials. Then we will find out their cumulative percentages.

What we will observe in almost every case is that 20% of the items account for around 70-

75% of the cost. These items will be placed in the A category. The next group is the B

categoryin this group we see that 20-25% of the items account for 25-30% of the total cost.

The remaining items will account for only around 10% of the costthey will be placed in the

C category.

The inventory control for these 3 categories of items will happen differently. A category

items should be given maximum importance. They should be ordered according to an

Economic Order Quantity to reduce costs and wastages. There can be a regular purchase of

these items on a daily basis so that we can reduce our inventory levels, storage costs, and

wastages. Besides, this will help us give fresh meals to our customers.

B category items can be purchased once a week or so, so that we can avail of bulk discounts

when we give larger purchase orders.

C category items can be purchased a little less frequently, so that we can avail of discounts.

Bulk buying + Freshness:

When we buy in bulk it sometimes means that products will get stale or go bad if they are

simply bought and stored for long. So one option here is that we can purchase in bulk but

request our suppliers to give us a staggered delivery of these items. They can deliver our

complete order to us in multiple parts. This way we can be assured that less wastages will

happen at our end. If any rotten, or stale ingredients are received from the suppliers then it

can be returned to them and replaced.

Variance:

Average no of orders for a particular dish per day doesnt give us a holistic picture. We need

to see the varianceeg for a plain cheese pizza, the orders can be from anywhere between 4

and 10 orders. So while deciding the quantity to be purchased, we need to make provisions


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for this variance we need to keep tweaking the order quantities or we can always keep a

safety stock of every item and use the items on a FIFO basis.

The Ordering Procedure

Strengths

In Holiday Villa Hotel & Suites Subang decide the size of the order by placing a particular

order. Holiday Villa Hotel & Suites Subang also follows the orthodox approach of par stock

for order size.

Here the hotel keeps the track of all the material which is in hand i.e. in the pipeline, the

product that is required for the banquet and other special functions and the stock of material

which is in the main store room. In the calculation of getting the order size we take the par

stock and subtract the stock that is in the hand out of it, and then the required product for

banquet and other functions is added into it.

In simple terms,

Par Stock

- Stock in Hand

+ Required Product for Banquet and Other functions

= Order Size

In the purchasing department of Holiday Villa Hotel & Suites Subang the purchasing

department person makes the purchase order according to the requirement and the inform the

supplier or send the purchase order to him. At the same time the purchasing department

person keeps one or more than one copy for his reference in the future. The lots of formalities

between the buyer and the supplier depend on the past relationship between them and the size

of order.


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It is not the fact that there are problems only in case of placing the order through call. The fax

is an easy and low cost method for placing an order. Moreover the order made through fax

contains more details and the chances of error are least in this case. However, nobody can

guarantee that the fax has been received at the other end by the right person and the order is

accepted by the supplier.

In order to prevent all these errors to happen Holiday Villa Hotel & Suites Subang has taken

some of extra steps to minimize the chances of error in placing the order from their side.

Holiday Villa Hotel & Suites Subang follow double check system to confirm that the order is

rightly placed with all the minute details and the supplier has accepted the order and send his

confirmation to deliver the order in time.

In this method, whenever the purchasing department of Holiday Villa Hotel & Suites Subang

places an order, it makes a fax which contains all the details regarding to the order material,

quantity, time limit etc. After this step a call is made by the purchasing department of

Holiday Villa Hotel & Suites Subang in order to verify that the order has been accepted by

the supplier and the supplier is ready to deliver it on time with all the other mentioned

condition.

It is important to notice that there a number of orders are placed everyday in Holiday VillaHotel & Suites Subang and the same procedure is followed every time. The double security

system in Holiday Villa Hotel & Suites Subang makes its purchasing order more secure and

error proof. On the other hand the weakness of the ordering procedure is that on one

purchasing order a fax and a call is made, which cost higher to the Hotel.

Purchase Requisition

Strengths

In Holiday Villa Hotel & Suites, purchase requisition is raised by the manager with the help

of the chef especially for those items which are not regularly ordered. In this process the chef

also gets the permission from the manager to use the product or the item in the production.


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In Holiday Villa Hotel & Suites, purchase requisition is used for internal purpose to know

about the exact demands. Hotel does not use purchase requisition for placing the order for

regular used items. Purchase requisition use to place the order of non recurring items. All the

other items which are placed by the purchase department on the regular basis reflect on the

order form directly.

Purchase requisition has certain advantage; it is widely used for the training purpose of

various department heads and purchase department. By the help of purchase requisition the

uncertain demands are placed by the purchasing department. The purchase department can

demand for the details for the specification of the orders made through purchase requisition.

There are more advantages of purchase requisition which saves cost incurred on the purchase

items. With the help of purchase requisition the purchase department gets to know from the

production department about the items which are already in the stock and the amount that is

required to order. The purchase department of Holiday Villa Hotel & Suites also extracts the

information regarding to the stock in hand, stock consumed and the stock which get wasted in

the past.

Weaknesses

There are situation when purchase requisition has to face some potential problems which

dilutes the system of purchase requisition. In some of the cases the number of people

involved in deciding the product that needs to purchase are too high. Hence the conclusion is

not made by the purchase department that which product needs to order and which to not.

The Purchase Order

Strengths

The request made by the purchase department to the supplier is known as the purchase order.

It is taken as a commercial document which tells the supplier about the details of the order

that needs to deliver on a specific date.


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The purchase department note down all the dates on which the orders are made which helps

in deciding the date on which the payment of the order will be made by the Hotel.

The purchase department of Holiday Villa Hotel & Suites also communicates on the transport

and the packaging of the incoming material to the supplier. The purchase department also

mentions the type of products, quantity of each product and unit size of products in the

purchase order to have the minimum discrepancy on the incoming material.

In Holiday Villa Hotel & Suites each order is made with four copies of purchase order. One

copy is sent to supplier, second one is with the receiving clerk, third copy is kept with

purchase department for maintaining record and the fourth copy is used by the supplier as the

bill which sends back at the time of delivery. The copy which clerk keep with him is used to

check the items during the delivery of the items. This system helps Holiday Villa Hotel &

Suites in keeping the track of all the incoming material and use the information for future

references.

Weaknesses

At the time of making an order and filling the purchase order, the purchase department needs

to be extra cautious so that any discrepancy would not occur in the accounts and the wrong

item is not ordered and the quantity is rightly ordered.

The action for purchase order needs to be quick enough so that the Hotel will not face the

problem of stock out cost. In addition to that the order should qualify all the calculation of

minimum procurement cost, inventory carrying cost, discount given by the supplier, batch

size of the order and most important the self-life of the product.

The purchase department of Holiday Villa Hotel & Suites is consistent in terms of their

efficiency in placing the order and keeping a regular contact with the other departments.

However, there is possibility that more systematic approach is adopted by the purchase

department keeping the historical data of purchase order in mind.


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Problem

During my two months of training in Holiday Villa Subang I came across with many

problems in the working of the system and the procedure adopted by them. Some of these

problems are very small although it was reducing the efficiency of the people working there

considerably. Other factors which are although small but all these factor when combined

considered can cause a greater impact in the systems working I have categorized these

problems into two parts :

1. Internal Problem2. External problem

Internal Problem

These are the problem that arises out from the internal sources and because of following of

procedure in a wrong way. During my two months of training in this hotel I got the

opportunity to work in many departments. This allowed watching these entire departments

closely and thats why I understand the working of these departments and find the areas of

improvement in the system. During my tenure of two months I worked two weeks in Finance

department. Although it was a short duration to analyse but I find out some of the internal

problem in the Finances department.

The main problem that having internally was Fidelio system that they are currently using.

Fidelio was software design to cater or work for schools, hotels or hotel groups .This system

is designed to link most of the department of the hotel so that these departments can share the

information with each other easily. For Example Purchase department can share information

of daily purchase item with kitchen and also kitchen department can share its inventory with

the purchase department. This flow of information allows effective and efficient working of

all the departments.


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The system was designed to act as a hub of information for all other department and also to

increase the flow of information inside the hotel between the departments. This is the major

concern in all the sectors not only in the hotel industry. Proper flow of information is must for

proper working of any organisation. In absence of flow of information communication gap

start building which was responsible for conflict. But when this system was designed it was

configured to the system with the configuration available at that time .with the time these

configurations become obsolete and didnt match the current speed of the computers

available now days.

Currently they are using Fidelio system version 6.1, it is an outdated version and also it os

slow in its working. These problems occur because up gradation of software need to done

from time to time which is not happening in hotel. This cause the software to get outdated

.For information the purchase department is practising this system on daily basis . Some of

the activities that is being done by Finance department on daily base are:

o Search for details or contact of supplierso Daily purchase specificationo Record of everyday purchase itemso Purchase requisition from each department especially from Kitchen and Food and

Beverages department

With in two week in this department I learned to use this system. The system in the finance

department works as assistant will get the requisition of requested item from each department

through Fidelio system except for any special item that is never ordered before.

After getting the details of the required item assistant check for the supplier of the demanded

items in case the item is out of stock. If this demanded item is out of stock with the supplier

then we can check other supplier too. They have a policy of having at least three suppliers for

each item they required or going to required in near future. Beside they need to provide the

respective prises of the supplier in which they are going to provide the items to them. This


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helps them so as to order under the budget they are provided and not to over purchase or over

spent. With the use of Fidelio it makes this procedure easier and faster.

However the current version used by hotel is Fidelio 6.1 it is a bit outdated and creates a lot

problem. In the interval of working with the finance department I observed that the system in

which all this process is working is very slow. In case we are rushing for the requested item

for the next day which they usually do or even if we are searching for the suppliers, price,

quantity the system did not respond well and quick. Because of all these problem purchase

order did not get issued in time and these delays the process. To compensate this delay

Purchase department have to work overtime. The main motive of installing the Fidelio i.e. to

make the process of generating purchase order faster does not get fulfilled simply because of

systems incapability.

In my opinion operating system of the computer which is at present is windows 1998 should

been updated to 2000 at least. This will enhance the speed of the computer and makes it faster

and also space for the memory will be more available for information and details in the

desktop. By doing this the time wasted in regeneration of purchase order or trouble shooting

of system gets saved which can be used for some other productive work.

Next problem that is being identified was that, every time we enter the purchasing office we

can see that there are a lot of files, paper work, invoices being stacked upon. Also the size off

the office is also very small which can accommodate only one person which is the purchasing

officer. All these files are shelfed behind purchasing officer. According to me there is not

enough space to keep those files there. There should be some other space where these file

should be kept. This room can store these files now but not for very long time as with more

files needed more space. There should be a store room for storage of these files. Store room

of the account department can be shared with the purchased department since it is big enough

to accommodate the files of both departments. While sharing store room they can prepare

only one file for one or two supplier name that start with letter A.

Third problem that is being observed is that even after implementation of Fidelio still there is

a lot of paper work that is being done. This is responsible for the problem of handling these

files. If these information can be converted into electronics form then a lot of time in


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handling these paper and also time wasted in searching for information and files can be

saved. After feeding of data in the computer file can be scraped as data is saved in the

computer.

External problem

External problems are the problem which is being faced by hotel and cause for the problem is

an outside factor. Although hotel has less control over those factor to control but still some

measure can be taken so as to reduce the odds against hotel.

The most common problem that arises in the hotel is problem of out of stock for items

required for food preparation. Generally there happens a delay in the delivery by suppliers.

The cause for this delay was generally transport breakdown, and it happens nearly 2 times in

a month. Example the food item needed for food preparation by kitchen is to be sold in food

and beverage outlet. Any delay in the food delivery can harm the reputation of the hotel .In

service industry like hotel industry you don't sell food; you sell service, luxury and comfort.

It doesn't matter what service or hospitality industry your are in--you live and die by

customer service, customer satisfaction. Therefore delay longer than expected tends to

decrease the level of satisfaction of the customers and will eventually cause the loss of

business.

In order to solve this problem there should be a formal agreement between the hotel and the

supplier. In case if a supplier delays the delivery of ordered material the supplier is

responsible. However the staffs which is responsible for the procurement of the material

seldom follows the contract that is being agreed earlier. Apart from this problem some of the

items which are in high demand have limited supply and usually less than demanded becomes

out of stock. Current strategy is to order only that much which is required so as to reduce the

cost. Early orders and purchase inbound can become very useful in give condition for the

hotel. Beside this hotel can procure the material at the seasonal time so as to avail the

seasonal discount.


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Another problem that the hotel encounters is the supply of damaged and sometime wrong

order. This problem happens twice a month. Supplier handle the order very carelessly and

many a times deliver the damaged good to the hotel whose damage was finally have to bear

by hotel and is also not good for the hotel profit. Only supplier is not responsible for the

delivery of wrong order sometime it is the mistake of staff in placing the order. This can be

rectified by carefully ordering the required item and checking it before placing the order.

Since there is a communication gap in between the departments which was many a times

responsible for the wrong planning of the material. Layout of the purchasing department and

the receiving department separates them that is why they seldom meet each other. It must be

ensured that there should be no communication barrier in between the department and flow of

information among purchase department, receiving staff and supplier should be smooth and

regular. Until and unless this communication gap is not removed till then these all will not

cooperate.


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Conclusion

Hotel Holiday Villa Hotel & Suites Subang is incurring losses in procurement because of the

inefficient purchase cycle. Inter department communication is also responsible for the

inefficient purchase cycle. The new system proposed in this report is highly efficient and it

will help to overcome the problem of loss making purchase cycle. It will also help to

maintain the quality of the raw material. It will also help us to overcome the inter department

communication problem. But although this system looks very effective but the

implementation of this system will not be easy. Because outsourcing the purchase department

of and hotel is a new concept so it will be difficult to find the vendor for the system. So at

beginning we have to go through the vendor development program. Then only this system

can get success. So we may have to incur loses in the beginning but in the long run it will be

profitable for Holiday Villa Hotel & Suites Subang as well as the third party(supplier).

If Holiday Villa Hotel & Suites Subang outsources the purchase department to third party it

will create a new business opportunity for entrepreneur. If this system get success it is

obvious that other hotels will also follow the suite. This scenario will give the entrepreneurs

an opportunity to expand their business. So overall this system will help Holiday Villa Hotel

& Suites Subang to minimize losses. But at beginning this system has to overcome few

hurdles.


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Sample Purchase Order Form


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Sample Purchase Requisition Form

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