Introduction
The supply chain in the catering industry has become very important, and firms can no longer ignore its relevance in the modern world. According to Grant and Jordan (2012), the catering industry is emerging as an independent and robust industry from the hospitality industry. For a long time, it was considered part of the hospitality industry. However, it has expanded, and now it is considered an industry of its own.
Many catering service providers have designed their product delivery methods in a way that they can offer their services in any place that their clients require. Catering services are now available onboard planes, on cruise ships, on trains, long-distance buses, in garden weddings, and virtually any place that one may want to have a supply of food. The growth of this industry has seen the entry of many players who are keen on tapping into opportunities. This has seen an increase in market competition over the past recent years. According to Taylor (2004), competition in the catering services has forced many firms to come up with strategies that can help them remain at the top of their game. The only way of doing this is to deliver high-quality products to the customers as and when needed. To do this, a firm must have an effective supply chain design.
The research by Lynch (2012) notes that the supply chain in the catering industry is different from the supply chain of other industries. In the catering industry, almost all the raw materials supplied to the firms are perishable. In order to prepare a high-quality meal, a firm must get fresh supplies. The problem, in this case, is that sometimes it may be necessary to have the inventory in-store in order to meet the changing demands in the industry.
This is even more challenging for firms providing catering services to the airline industry. Sometimes they are given a short notice of less than an hour to deliver an order that is meant for over 300 people. In other cases, the original order may be canceled in less than two hours to deliver. This means that the firm must be in a position to respond to these changes in the fastest way possible without running into a loss or failing to deliver products. Just in time delivery is, therefore, of critical importance to the players in this industry. They must know how to move with speed in responding to the requests of their customers. That is why catering firms are now forced to use unique designs in their supply chains in order to meet their unique industry needs. In this research paper, the focus will be to determine the relevance of technology-based strategic sourcing as a way of improving the supply chain in the catering industry.
Evolution of the Concept
Historical background
The supply chain was traditionally considered a simple process where a firm would coordinate with the producers of the raw materials to delivering specific products at a given date. However, the changing environmental factors have redefined the concept of the supply chain. Many firms realized that the supply chain strategy used firms dealing in non-perishable products such as cement could not be applicable to supply chain strategies used by firms dealing in perishable goods. In the catering industry, there emerged the need to have a unique supply chain strategy that would be responsive in real-time.
According to Bowersox, Closs, and Cooper (2014), many catering firms raised that in many cases, their trusted clients would adjust their orders a few hours before the time of product delivery. If a customer cancels an order a few hours before the time of delivery, then it means that the catering firm may need to find a way of halting the production process in a way that will not lead to significant financial loss. As mentioned before, almost all the raw materials used in the catering industry are perishable products. This means that halting the process when the raw materials have been delivered may lead to a loss. A firm must, therefore, have a system that will help in halting the delivery of the products from the suppliers. In other cases, a client may request an increase in the quantity of the originally made order a few hours before the delivery time.
When that happens, Barney and Hesterly (2012) say that a firm must be able to source for the raw materials within that short time and deliver the products as per the demands of their customers. This may be quite challenging, given that sometimes it may not be easy accessing these raw materials within such short notice. Canceling of the originally placed order with the suppliers may sometimes cause a strained relationship. In fact, Mitcham (2011) says that it may even result in mistrust. A supplier may not trust orders placed by such a firm, and this means that such a supplier may easily ignore such orders. That can be very serious.
This uncertainty forced many firms in the catering industry to devise different approaches that would enable them to manage the challenges they faced in product delivery. Many of these firms started using just in time delivery approach. This supply chain practice proved very successful to many firms in this industry. It is still in use to date. However, almost all the firms in the catering industry use this strategy, and therefore, it offers no additional advantage over other rival firms. That is why firms have been keen to develop other additional strategies to improve their competitiveness in the market. Other useful strategies that have been implemented by some of the leading catering firms around the world include collaborative strategic sourcing and strategic alliance with the suppliers. In many respects, these strategies have worked. However, the emerging trends in the industry demand more.
Current trends and context
According to Bolstorff and Rosenbaum (2012), catering firms, especially those offering their services to airline customers, are faced with a new trend that is posting serious challenges to their operations. Most of the airline firms are now keen on cutting down their budget. One of the ways of doing this is to reduce the cost of catering services they offer to their clients onboard their planes. This new trend has had many of the catering firms counting losses because they had not mastered the trend in the industry. Airline companies are now making adjustments on their orders a few hours before the time of take-off.
Leon (2013) says that in many cases, an airline firm may receive flight cancellations a few hours before the take-off time. When this happens, it only means that they would require less amount of meal ordered. If the original order is not adjusted, these airlines may be forced to throw away the remaining amounts, and that may lead to a direct loss for the firm. It is because of this that many of them are now keen to adjust their orders when they receive such cancellations. The catering firms must be in a position to respond to such adjustments within the shortest period possible. In other cases, an airline company may request an increase in the number of meals to be provided because of last-minute bookings.
When such eventualities occur, the catering firms must be in a position to adjust the number of their products upwards within the time provided. These last-minute changes on the original order are not a simple thing. It poses a serious challenge to catering firms. They are forced to live in a world of constant uncertainties. They do not know what tomorrow holds. They keep guessing the possible changes that their clients will make on their orders a few hours or sometimes less than an hour before the delivery time. This even poses a big challenge in terms of the number of people to employ. A sudden increase in demand will force a firm to have more people working in the supply chain. A decrease in demand decreases the number of people needed to work in the same chain. This is a challenge that many firms are still struggling within the market today.
However, the emergence of technology-based strategic sourcing is promising to help in addressing this problem. It promises to reduce the last minute rashes or at least prepare the catering firms about the impending changes before they actually occur.
Description of the Supply Chain Practice Including Its Key Elements
Technology-based strategic sourcing is a relatively new concept that has been in use for some time now. The strategy is now well documented by the existing literature because it combines a number of existing strategies into a new integrated system meant to empower catering service providers. It brings together two major concepts of strategic sourcing and the use of technology in sourcing (Johnson, Scholes & Whittington 2011, p. 74).
The concept is simple but very effective and requires a highly skilled team to execute it. Strategic sourcing has widely been used in catering as a way of bringing together a close relationship between the supplies the catering firm and the customers. In this system, when a customer makes a call adjusting the products needed, and then the catering firm would call the supplier in order to effect such changes when delivering their products. This is what has helped most of the firms operating in the catering industry. The close relationship helps the firms to have a forum where they understand one another and commit to offering necessary helps for the overall growth of the three partners involved.
The catering firm will appreciate the significance of order adjustments based on the changes in their booking. They will appreciate the fact that these airlines are trying to maintain low-cost production while delivering high-quality products. On the other hand, the suppliers will understand the relevance of the catering firms to respond immediately to such changes in order to meet the needs of the supply firms. This integration is unique but very important. It allows all the stakeholders involved in the supply chain to closely coordinate for the benefit of all of them,
The use of technology in such a closely integrated system is what is referred to as technology-based strategic sourcing. It allows the stakeholders to closely coordinate their activities in a way that may not necessarily need a phone call. According to Bolstorff (2012), sometimes, a phone call may not be made as soon as the changes occur, leading to delays. In this new strategy, the airline company, the catering service provider, and the supplier will have a closely-knit system that allows the two other players to monitor the events taking place at the airline company. Any cancellation of booking would be seen as soon as it occurs. Any last minute bookings will also be captured in real-time.
The information will be transmitted in real-time to the system of the catering company, where the supplier will be able to pick it from and act upon it. This means that the three players will be able to coordinate their activities without the need to make phone calls, as is the case in most of the catering companies today. Sometimes one may forget to make the phone call at the right time, and this may lead to inconvenience to all the three firms involved in the supply chain. When the data is made available in real-time, then it is easier to coordinate these activities.
Key elements
This new supply chain practice has a number of elements, two of which have been discussed in the section above. As stated, the first element in this practice is the integrated relationship between the suppliers, the catering firm, and the customer. This allows for a close sharing of information relevant to delivering high-quality service. The second element is the use of technology to relay the data. This means that the information needed by the catering company and the supplier about the number of supplies needed will be accessible in real-time. The third element is the security of the system. This supply chain practice can be ineffective if it does pose a threat to any of the three players involved, especially the airline company. Airline companies are always very sensitive when it comes to the issue of their security.
These airbuses carry hundreds of passengers on a single flight. Some are prominent people with enemies who may want to destroy them. For this reason, they would prefer traveling without the knowledge of the public, especially individuals they believe have the potential of causing them harm. That is why many airline firms are always uncomfortable when it comes to releasing important information to other firms. The developers of this new system appreciated that this might be a problem. For that reason, they came up with a system that only indicates the number of seats confirmed per flight, neither indicating the seat number nor the name of the passengers on board. Utmost good faith is another element of this system. This means that even though the information available to the other two partners in this system is scanty, it can still be of use to terrorists or individuals who may have ill intentions. For this reason, the scanty information should purposely be used to deliver services to the customers onboard these places, and for no other reason. The two players must commit to ensuring that this information remains secure in their systems in order to protect the ultimate customer.
Supply Chain Process Map
The supply chain map may help in illustrating the activities and processes involved in technology-based strategic sourcing. It has been mentioned that this supply chain practice brings together three major players. These players include the organizational buyer, which in this case, has been identified as an airline company, a catering company, and a supplier. These three players operate in a closely integrated system in order to enhance communication between them. This unique relationship is made possible through the use of emerging technologies. The figure below demonstrates how these three players and interrelated to one another
As shown in the above map, the system does not allow the supplier to access data directly from the organizational buyer. This data is made available to the catering company. The catering company may have a number of important suppliers responsible for various products. The supplier will determine which of the suppliers should access the given information. This means that when the data gets to the catering company, there is a filter that will determine what the suppliers can access. This is meant to empower the catering company. When the flow of data has been established, there is a process that defines the relationship of the players in this system.
The relationship is a commitment to secrecy. Once the data has been made available, the catering company and the supplier must make a commitment to treat the message confidential from any third party who may need it for whatever reasons.
The catering company is responsible for the airline to protect the information they get about the number of bookings. The supplier is responsible for both the catering company and the airline firm. To the airline firm, any attempt by the supplier to release the information will be a betrayal to their business relationship. This may derail the prospects of future business relationships. To the airline company, releasing such information to the third parties may be viewed as a malicious act meant to cause harm to the airline and its passengers. The airline company has all the right to instruct the catering company to source for an alternative supplier who can keep the information as a secret.
It is through such commitments that this system can operate without being abused. According to Petter (2006), one of the most important ingredients that define the nature of the business relationship between two firms is trust. Firms that have trust towards one another may not find a problem engaging in a profitable business relationship. However, when the trust is abused in any way, then regaining it may be more difficult than it was when developing it. The players in this supply chain process must understand that this supply chain practices heavily relies on trust. When trust is breached, then it may not be easy for the system to function optimally.
Supply Chain Analysis
According to Berggren, Bergek, and Bengtsson (2013), supply chain analysis has remained the same despite changes that have taken place in this field. It still involves a firm getting the right raw materials from the supplier and developing the needed products then delivering it to the customer. This is pretty the same thing that takes place in a catering supply chain. However, modifications have been made in this process to ensure that maximum value is generated to the players involved.
Tallman (2009) says that in catering, the number of suppliers can sometimes be numerous. A catering firm may need vegetables, fruits, meat, flour, beverages, and other ingredients needed to prepare a meal. Each of these suppliers plays very important roles in ensuring that the catering firm delivers on its promise to the clients. Sometimes it may be challenging to coordinate with numerous suppliers, especially when handling highly perishable products that may be needed in varying quantities. It is at such moments that technology becomes an integral part of the supply chain system. Technology makes it possible for a firm to individualize the suppliers and create channels where the catering firms will communicate with them directly.
The system makes it possible for the supplier to interact with the supplier individually. This way, it becomes easy to develop a close relationship even though the number of suppliers may be high. When there is an issue with one supplier of a given product, the system will automatically identify an alternative supplier that can meet the gap left by the main supplier. As explained in the above section, the system also allows the suppliers to know what their clients- the catering company- needs at every moment, and how these needs change due to changes in the demand placed by the airline company. Through this industry’s best practice, airline firms get to concentrate on delivering high value in their production methods other than wasting a lot of time trying to find ways of sourcing for various products when given order within a short deadline.
Key Issues in Designing and Implementing the Practice
Technology-based strategic sourcing is a new strategy that promises to improved service delivery among catering companies. It promises a new era where orders will be met even if changes occur within an hour to the departure time. This means that there will be improved experience among the ultimate customers in this entire system- the travelers. They will get their desired meals ready when they are making their travels. The figure below is an image of a flight attendant serving food to the passengers onboard a plane.
Despite the promise, Lynch (2012) says that there are issues that may affect the ability to make use of this system in an effective manner. The biggest issue in designing the program is on how to make it possible for the firm to communicate to the catering service provider about the changes in their booking without revealing the flight number. In many cases, it would be easy for the employees in the catering company to know the flight number once they are aware of the time of the departure. However, technocrats in information technology are trying to come up with software that will eliminate the possibility of detecting the flight number.
When it comes to implementation, the biggest issue that is still affecting the use of this practice is the security threat. Many of the airline companies are unwilling to share important information about the number of clients on board their planes every time they take off. As Coyle, ‎Langley, and Gibson (2008) note, the issue here is nothing but security. If the issue of security can be addressed, then technology-based strategic sourcing can be one of the most effective supply chain practices in the modern world. The practice is still under review in order to find ways of enhancing issues of security.
Major Benefits, Risks/Cost of the Practice
In this section, it will be important to look at the benefits, risks, and costs of the practice. This will make it easy to determine its viability to most of the catering firms that may be looking forward to using it as a way of improving their service delivery and competitiveness in this industry.
Benefits
Technology-based strategic sourcing as a supply chain practice offers a number of benefits. It eliminates the costs of making constant phone calls to the airline company and to the suppliers in order to address issues regarding changes in the number of products desired in each flight. This system will also ensure that suppliers will be delivered just on time for the preparations. It means that the products will be fresh from the farm; hence the meals produced will be of high quality. The figure below shows an assortment of delicacies meant to deliver a high experience for the ultimate consumers.
This system also enhances close alliance between the catering and the suppliers on one side, and the catering company and its organizational buyer on the other side. The alliance is facilitated by close communication and coordination meant to ensure that there is the maximum value delivered out of every business transaction that takes place.
Risks
The main risk when using this system, as mentioned above, is the threat of the data reaching the wrong people. Airlines are always very sensitive when it comes to protecting data about their flights. In a world where terrorism is becoming increasingly common, airlines are keen to ensure that its passengers are safe when they are flying to different destinations. Data about the number of people onboard a given plane or the specific names of people boarding a given plane may pose a security threat. This is specifically so if the passengers are prominent people that may be a target to a given rival group interested in destroying them. One of the ways such individuals can be destroyed is through planting explosives in such planes, shooting the plane while taking off or landing, or planting assassins in the plane to execute the plan. That is why the airline companies are keen on concealing the identity of their clients to third parties.
Cost
This is a cost-friendly practice that will help a firm to reduce expenses when using other strategies to enhance the capacity of its supply chain systems. The initial cost may be high in terms of hardware that will be needed at the premises of the catering firm, the airline company, and the major suppliers trusted by the first two stakeholders (airline and catering companies). There will also be a need to purchase the software that makes this happen.
However, after meeting these initial costs, the subsequent costs will only involve maintenance fees. When installed and in use, a firm will eliminate the cost of constant phone calls, time wasted moving from one place to another, and the cost of delayed delivery, under-delivery or over-delivery of a given raw material. This is so because this system will inform the catering company in real-time what each flight expects in terms of catering services. The information will be filtered automatically and then sent to the relevant suppliers of specific products almost in real-time so that they can act upon it. If the number of passengers has increased, then the supplier will adjust the original order upwards. If the number is lower, then the supplier will know how to reduce the number of their supplies. This means that every time they make their deliveries, it will be based on facts, and this will ensure that the amount required is delivered on time.
Trends in UAE/GCC and Successful Usage of the Practice
In the Gold Coast Region, there have emerged major airline companies that are competing favorably with other dominant players in the aviation world. Emirates Airlines and Etihad Airways are some of the leading airlines in this region. This has boosted the catering industry meant for the airline industries. However, these major airlines have become more demanding in terms of the quality of meals they get and the delivery patterns.
These firms want catering companies that can respond to their demands on short notice. This has forced catering companies to come up with various strategies that can help in delivering high quality to the customers based on their needs. Technology-based strategic sourcing is a new supply chain practice that many firms have been using without their knowledge in different variants. In this section, the researcher will look at how Emirates Catering uses this technology as a best practice for other firms who may be interested in applying the strategy in their operations.
Best practices: Emirates Flight Catering
Emirates Flight Catering Company was founded in 2003 by the Emirates Group to offer catering services to its travelers. The firm is headquartered in the city of Dubai and now offers catering services to numerous airlines operating from Dubai International Airport. According to Bowersox, Closs, and Cooper (2014), when this firm started its operations, it was majorly serving travelers using the services of Emirates Airline. However, it expanded very fast, and by the end of the year 2006, the firm had established new facilities capable of offering catering services to over 115,000 travelers in a day. This was a higher number than what Emirates Airline was offering in a day. That is why the management decided to expand the scope of its market by targeting other airline companies that were using Dubai International Airport.
Emirates Flight Catering, just like many other flight catering companies around the world, has been struggling with the issue of supply chain management in the world where customers have become very demanding. The management of this firm has been struggling to manage the changing demand of its major client, Emirate Airlines. In some cases, orders would be canceled at the last minute when the materials have been delivered. In other cases, the airline would demand increased amounts of meal shortly before the flight takeoffs. The management found this to be very challenging (Berggren, Bergek & Bengtsson 2013, p. 78).
The company tried using various supply chain management tools in order to cope with emerging challenges. Just-in-time delivery proved to be the best supply chain practice that could enable it to address the challenge it was facing. However, the firm realized that there was still a challenge in making this tool for functioning effectively. It was necessary to have information about the required order within the shortest time possible.
This message had to be delivered to the supplier in real-time in order to have achieved success with this new tool. It was due to these new developments that Emirates Flight Catering embraced technology-based strategic sourcing. According to the reports released by the management, this practice has enhanced the productivity of this firm since it was reduced. The quality of products delivered to the customers and delivery methods have also improved. The figure below shows a customer taking a light but very nutritious meal onboard a plane.
Emirates Flight Catering found it easy to start using this practice because of the trust it had with the Emirates Airline because both were owned by Emirates Group. However, it has perfected the use of this practice, and other airlines now trust it with their data.
Managerial Recommendations
This report clearly demonstrates that technology can no longer be ignored by flight catering companies. According to Coyle, ‎Langley, and Gibson (2008), in the competitive business environment of today, it is only those firms with the best practice that can withstand stiff competition in the market. Technology-based strategic sourcing is one of the practices that flight catering companies are using to manage their supply chain. It is, therefore, recommended that any catering firm should consider this practice when defining their catering supply chain design. The following recommendations should also be put into consideration.
- The management of catering companies should consider embracing emerging technologies in order to improve their technology-based strategic sourcing
- The management should make an effort to ensure that there is trust between it and the two other stakeholders in this chain (clients and suppliers).
- The management should enhance its data protection system to ensure that important information about the customer does not leak to third parties.
- The management should engage the two other stakeholders in forums that will ensure employees managing these systems understand how to detect, deter, or counterattacks into the data system.
The above recommendations are meant to enhance the value generated by using the system in order to ensure that customers and suppliers trust its application.
Conclusion
Catering supply chain management is one of the most challenging tasks that many managers have to deal with. This is specifically so because of the nature of the products they have to deal with. Most of these supplies are perishable. The uncertainty that has become common in the aviation sector, in terms of the number of last-minute cancellations or bookings, has made the catering supply chain even more challenging. Firms such as Emirates Flight Catering have embraced technology-based strategic sourcing in order to address this challenge. This practice ensures that the catering firms get information about changes in the booking in real-time, and the information is sent to the suppliers immediately to ensure that the right amount of suppliers is delivered in time for meal preparations.
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