Operations and Supply Chain Management Essentials You Always Wanted To Know: Self Learning Management

​What is Supply Chain and Operations Management?

If the need for effective Supply Chain Operations is so critical, what does that mean? How can one accomplish it and what should you be concerned with? The Supply Chain involves the activities within the company that bring products and services to life. It includes the flow of goods, both in the form of raw materials and finished products, how those goods are stored, and how they reach customers. It is developed based on a company’s business plan, which the Supply Chain can then turn into a reality. In doing so, supply chain teams are often responsible for balancing supply and demand, putting out fires, and ensuring the company is running smoothly.

​What are Benefits Delivered by Supply Chain Operations

Aside from market response, Supply Chain Management is an important consideration for managers. To demonstrate why modern managers are paying increasingly more attention to Supply Chain operability, let’s look at a few other ways the Supply Chain can enhance business performance.

• Competitive Advantage A Supply Chain can become a competitive advantage in countless ways if it allows a company to operate in a more favorable way that competitors are not able to match. For example, are you able to offer products in an area where none of your competitors can? This may be a geographic advantage in terms of your distribution reach. Can you manufacture the same product faster than others in your industry? This is an example of a competitive advantage driven by a company’s manufacturing process. This creates a more favorable position for the firm and thus results in greater profitability for an organization.

• Customer Satisfaction It is no secret that customers can have high expectations of the products that they purchase. There is an expectation that the desired product can be delivered at a specific price, in a specific location, at a specific time. For any company, there are costs associated with how you provide such availability and service to your customers. Without effective Supply Chain Operations, hiccups such as inventory shortages or delayed service requests can decrease customer satisfaction and even lose customers to a competitor altogether.

• Efficiency Few areas within an organization can improve efficiency quite like Supply Chain Operations. Everything from reducing the amount of material input required for a necessary product to the number of people required to produce the product will increase efficiency and can be easily traced to impacts on the bottom line, as you are achieving more with less. Walmart is a famous example for Supply Chain Operations efficiency – by harnessing new technologies they have been able to improve the flow of information throughout the company, and reduce the amount of inefficient and excess inventory.

• Cost Cutting Perhaps the most commonly recognized form of Supply Chain Operations benefits, Cost Cutting, is closely related to efficiency. Because there is direct contact with the product or service being offered, Supply Chain Operations has the ability to impact cost decisions, such as decreases in the purchasing costs of product inputs, decreasing the cost of production, and eliminating expensive product attributes. Organizations are usually very cost conscious and work to deliver their desired value in the most cost-effective way possible, without sacrificing quality.

These are just some of the many benefits that can be delivered through Supply Chain Operations. Each benefit requires cooperation and collaboration with other departments within the organization to achieve such synergies. Just as important however, is that each functional area within the Supply Chain Operations category coexists with one another to deliver the company’s desired strategy.

​Functional Areas Within Supply Chain Operations

The Supply Chain Operations function is broken into a series of different departments throughout an organization. It is important to distinguish early on the difference between the terms Supply Chain and Operations because although both traditionally fall under the responsibility of the Chief Operating Officer (COO), there are subtle differences in what each area is responsible for. The key differentiating factor is that Supply Chain traditionally focuses externally around functions such as planning, sourcing and distribution that are impacted by environmental factors. Alternatively, Operations focuses on the internal processes within a company such as manufacturing and quality, and how these can be best controlled. What is critical to realize, however, is that these two areas overlap substantially, and are dependent on one another. As such, we can use the term Supply Chain Operations(SCO) to describe this standalone area of management.

We can see the various functions that will fall under the Supply Chain Operations umbrella. As the name suggests, the functions fall within a chain where each is linked and dependent on the one prior as well as after. It begins with internal strategy development, and ends as the business is able to deliver value to the market. Each link has a critical role to play in delivering such value.

Business Strategy Development:

Each company will develop a direction for its business that will be used to meet customer needs, achieve business goals, and remain competitive in the market through differentiation. Strategy discussions are traditionally determined at the highest level of an organization, which will then flow down from top management to all individuals in the company. With a strategy in place, steps can be identified, such as new product development or geographic expansion, to reach desired goals. These goals may include financial targets, or how quickly the company wants to grow. In addition to an overall business strategy, sub-strategies may also exist for specific areas of the value chain, such as a marketing strategy or research and innovation strategy. The key strategy considerations that we will focus on will be in relation to the organization’s supply chain strategy.

Planning:

With a supply chain strategy in place, a company must estimate what they think their performance will be. This is often considered forecasting, and will be used to predict how many units will be sold. Once this is determined, requirements for raw material inputs, production time and capacity, as well as storage requirements can be determined. It is important to note that units of product are not always tangible items. For example, music, software downloads, and e-reading material may have planning requirements in how a company would plan for delivery to customers. Developing an approach to planning will be further discussed in Chapter 2.

Sourcing:

Once a plan has been devised, the company must then source the materials that will be needed to produce their desired goods or services. This includes purchasing the raw materials from vendors that will be used as inputs to the manufacturing process. It may also include human capital that is required for assembling products, or a media firm that can assist in producing digital content. Sourcing involves selecting which resources to obtain, how much will be paid for those resources, when they will be delivered to the company, and who will supply them. Strategic relationships are thus very important for a company to define, in order to ensure consistent and reliable inputs into the Supply Chain.

Manufacturing:

The inputs gathered in the sourcing process are then utilized at the manufacturing stage. Manufacturing processes are defined based on the product being created, and the desired attributes of that product. How much or how many units to produce of that product is determined in the planning stage. Various manufacturing methods can then be used to shorten production times, hold less inventory, or produce less waste in creating the product. These decisions are all factored into the manufacturing design. The output of product is thus a function of the constraints in the design of the manufacturing