Supply Chain Response The 20.0 per cent loss in bed capacity elicits a 12.0 per cent increase in the rate of orders for new beds to 424.0 beds per month as the sector seeks to build out it capacity in order to restore normalcy to the sector. However, the recovery process is exacerbated by the fact that the supply chain has also suffered loss in capacity.14 As a result the procurement rate declined by 45.0 per cent to 185.0 beds per month. By the end of 2009, the rate of acquisition begins to rise above the rate of depreciation and rises steadily to pre-shock rates. As such the capacity of the industry rebounds gradually. This process involves long delays. By 2013 the industry is still below its pre-shock capacity of 57,024 beds by 15.0 per cent. Interestingly, if it is assumed the supply chain (manufacturers) suffered no loss in capacity then hotel industry recovery is catalyzed and reaches within 4.0 per cent of its pre-shock capacity by 2013. Again, the procurement process creates a significant increase in the amplification ratio from 1.0 to 8.9. That is, a 1.0 per cent increase in desired capacity causes an 8.9 per cent surge in the demand for new room capacity.
DISCUSSION AND POLICY RECOMMENDATIONS
Insights into Low Multipliers for the Tourism Industry
Both boom and bust scenarios yield insights into probable sources of the low multiplier effect found for Jamaica's tourism product a la Serju (2005). Experimentation with the model revealed that hotel suppliers (manufacturers) may face larger changes in demand than hotels do. Although temporary, during its disequilibrium adjustments, orders consistently overshoot their new equilibrium points. The further upstream hotel suppliers are (i.e. away from hoteliers in the supply chain), the more amplified their demand surges might be. This is a manifestation of the ‘bullwhip effect.’15 The analysis yielded amplification ratios for boom and bust scenarios as 2.8 and 8.8, respectively. These may seem benign. But as a manufacturer, the challenge of managing production costs, order cancellation costs, inventory costs and the quality of one’s output in the face of such
14 The supply chain is assumed to lose 40.0 per cent of its carrying capacity as a result of the natural disaster.
15 Bullwhip behaviour refers to the tendency of orders to increase in variation as they are passed upstream in the supply chain (i.e., away from the final consumer).