The growth of global business is accompanied by increasing complexity as well as an increase in the number and types of risks faced by corporations. Companies working in the hospitality industry face the need to develop effective strategies enabling them to run their business efficiently in the ever-changing conditions of their fastidious market. Supply chain management (SCM) and supply chain risk management (SCRM) in the hotel industry in the UAE appear to be vital for the effective functioning of this business field along with profit making.
In the following paper, supply chain management and supply chain risk management in the area of UAE hotel business will be examined in terms of its strategies, challenges, and importance. Generally, after the evaluation of varied data, it appears that SCM along with SCRM are vital for making financial profits and effective functioning of companies in the area of the hotelier business in the country.
First of all, addressing SCM in the hotel industry, its definition and importance is to be discussed. According to Fantazy, Kumar, V., & Kumar, U. (2010, p.685), SCM is an integrated approach starting from planning and control of materials, logistics, services, and information – flows from suppliers through manufacturers or service providers to the end customer; it represents a major change in modern business management practices. It is a very significant change because it acknowledges that individual firms no longer compete as independent units, but rather as supply chains.
The importance of the above-mentioned business strategy is conditioned by the ever-changing situation at this market (Zhang, Song & Huang 2008; Berger, Gerstenfeld & Zeng 2004). The peculiarities of this situation can be seen in the following comment by Braunscheidel & Suresh (2009, p. 119),
Today’s marketplace is characterized by intense competitive pressures as well as high levels of turbulence and uncertainty. Organizations require agility in their supply chains to provide superior value as well as to manage disruption risks and ensure uninterrupted service to customers.
Further, with regards to the SCM strategies, it should be mentioned that they are many and each year their list is loaded with more and more newly invented efficiency concepts (Fantazy, et al. 2010, Espino-Rodrıguez & Padro´ n-Robaina 2005). Some of the most wide-spread and important among them are demand management, product management and information management (Buehler & Pritsch 2003).
Next, discussing the challenges to be met by SCM, it appears that they are many including instability in the world economy, constant shifts in the area of hotelier industry demand, and constant competition in the area. Hotels measure their performance by means of RevPar, Occupancy rates and VaR(Value-at-risk). Such strategies are a major pointer for most of the firms seeking to understand their sensitivity to variations in the market conditions.
Then, with regards to the already available knowledge concerning SCRM, it can be said that risk management practice entails not only formal rules and regulations but also risk management culture (Buehler & Pritsch 2003). Indeed, the rules and regulations are not enough to bring into line the incentives of the individuals with the members of the enterprise. To a certain extent, a SCRM culture should incorporate broad business goals into risk-aware decision making (Tan & Nurmaya 2011, Kull & Talluri 2008).
Risk management should not be left to an independent function but rather it should penetrate the culture of the organization in its entirety to ensure its effectiveness in minimizing risk (Hallika, Karvonen, Pulkkine, Virolaine & Tuominen 2004). Still, despite numerous researches which were done regarding SCRM in the area of the hotelier business many issues still remain uncertain (Kull & Talluri 2008).
Considering the importance of SCRM for hotels, it seems that increasing complexity of the global economic and financial systems causes it (Tang 2006). Enterprise risk management needs to cover a wide range of risks, including the daily operational risk, emerging risks and unexpected events. Hotels that align their treasury functions with risk management processes are better able to cope with the credit crisis than their counterparts. They also create internal pricing mechanisms that offer incentives for individual business lines.
The other important issue to be discussed is whether SCRM can be important for other service industries. Evaluating the situation, the answer is positive. In this vein, according to Altay & Ramirez (2010) and Neiger, Rotaru & Churilov (2007), many other service industries face similar difficulties to those ones which can be met in the hotel industry including the ever-changing market conditions along with the exactingness on the part of customers, and, thus, require similar business strategies or, in other words, effective SCRM.
As a final point, the importance of SCM and SCRM for hotel chains in the UAE is highlighted by the ever changing situation in this industry. Indeed, hotels that want to survive in their highly competing industry attach significant importance to their risk management arms and align them with the other important arms of their businesses.
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