Nowadays, starting a business is easy, but keeping it running smoothly and making it profitable is a hassle for practically every business owner. Producing and selling items are the two fundamental principles that a healthy business should prioritize above all others. Effective operations and supply chain management enable a company to handle various challenging issues for its growth and success. This article will give you a complete rundown of “what is supply chain and operations management” and how crucial it is to a business.
- What is operations and supply chain management (OSCM)?
- Similarities and differences between operations and supply chain management
- Why is “operations and supply chain management” important?
- Challenges of operations and supply chain management
- 5 operations and supply chain management best practices
- Supply chain management or Operations management: Which is right for you?
What is operations and supply chain management (OSCM)?
The term “Operations and Supply Chain Management” (OSCM) refers to the management of an organization’s supply chain & operations. It involves various tasks including sourcing, materials management, operations planning, distribution, logistics, retail, demand forecasting, order fulfillment, and more. It covers both the manufacturing and service industries.
The objective of supply chain and operations management is to assist organizations in increasing their operational effectiveness and efficiency while lowering expenses.
Similarities and differences between operations and supply chain management
Similarities
Both operations management and supply chain management are necessary for improving business operations, enabling more productive workflows, and eventually boosting profits for the organization. The two positions are closely related to one another to achieve those goals.
Differences
Even sharing the same goals, both of them have many different features.
| Operations management | Supply chain management |
| This management is mostly concerned with events that take place within the organization or business. | This management mostly focuses on events that take place outside of the organization or corporation, such as collecting materials, delivering items to the proper area, etc. |
| OM’s goal is the efficient use of the organization’s resources to generate goods or services, boost customer satisfaction, and produce goods of the desired quality within the allotted time. | SCM’s primary goals include maximizing the value that is generated overall, enhancing organizational performance generally, managing inventories properly, etc. |
| The operation management process includes planning, organizing, and supervising the production process and day-to-day operations. | Supply chain management operations include the design, planning, execution, control, and monitoring of all supply chain activities. |
| It controls the manufacturing process. | It controls the flow or supply of created goods. |
Why is “operations and supply chain management” important?
OSCM is critical to all businesses since it includes the planning and execution of all the actions required to produce goods and services. It involves controlling the movement of resources, data, and money throughout the full value chain, from suppliers to clients. We can list some vital benefits of an efficient OSCM as follows:
Improve efficiency
Streamlining operations and supply chain can help a business improve efficiency. When all the important processes are well managed and planned, there is no repetition and gap time for unnecessary things. It means that you can minimize resource waste and reduce costs.
Increase customer satisfaction
Another potential advantage of proper OSCM is customer satisfaction. According to zippia.com, 70% of companies believe that supply chains are a key driver for quality customer service. Effective management of operations and supply chains results in shorter lead times, greater overall service levels, and higher-quality goods and services. As a result, you will have more happy customers who are more inclined to do business with your company again.
Improve collaboration
Improved coordination between various departments and organizations throughout the supply chain is another benefit of effective OSCM. An operation is more streamlined and effective when all team members are communicating with each other and working towards reaching the same goals.
Reducing cost
Cost savings may be the greatest advantage of implementing OSCM. With effective operations and supply chain strategies, businesses can allocate resources efficiently and growth potential is harnessed. As a result, businesses can reduce production costs significantly and raise profits in the end.
In addition, businesses can more efficiently acquire resources and goods when they have a better understanding of their supply networks. It paves the path for higher quality and reduced prices.
Increase cash flow
Last but not least, improved OSCM results in enhanced cash flow. Effective management of operations and supply chains results in decreased inventory levels and shorter lead times for businesses. As a result, there is less money held in inventory and more cash is available for corporate reinvestment.
Challenges of operations and supply chain management
Digital transformation
This is a new and one of the most exciting challenges to OSCM. Using new technologies to radically alter how your organization operates and provides value to customers is what OSCM needs to approach. It’s not simply about deploying new technology. The fundamental goal of operations and supply chain digital transformation is to enhance customer experience by lowering barriers between consumers and suppliers through improved communication channels, real-time visibility into inventory levels, etc. For example, if you have a retail business, retail operations solutions can help you simplify all operation processes, especially automating inventory management and delighting your customer with an omnichannel experience.
Qualified personnel
The core of any organization is its qualified personnel, which ensures the company’s sustainability and expansion. Building a workforce with the necessary expertise and ability to continuously move the business’ needs ahead is necessary for effectively managing operations and the supply chain. This movement comprises the capacity to not just finish a task at hand but to see beyond it, innovate, and continuously get better. However, finding talented people who are enthusiastic and engaged in this field of employment has grown more difficult over time. It is a big challenge.
Quality customer service
OSCM is centered on client requirements. Giving the proper amount of a product, of the right quality, for the right price, and at the best customer service is important. However, customers have a variety of preferences, thus we must always cater to their needs. Offering distinctive solutions to clients makes a huge difference. Businesses that put forth the effort to learn about and invest in new technology are the ones that succeed in this industry.
Costing
Raw material, energy, and labor costs have all increased globally as a result of economic restrictions. This is a big challenge to OSCM. Your business needs to make some adjustments to maintain operations for production to continue and for customers to receive high-quality products at reasonable prices.
Risk management and forecasting
The risks for OSCM are always existing as a result of the market’s ongoing changes, brought on by a range of factors including consumer desires, political objectives, and global sourcing. Your business has to forecast and always be prepared with a risk management plan.
Sustainability
In a survey by EcoVadis and the HEC Paris business school in 2017, sustainability was recognized as one of the top five priorities by 97% of the procurement officers. The three pillars of sustainability are social, environmental, and economic. Operations management needs to consider how the business’s activity affects a community’s safety and welfare, the environment, and economic sustainability. When any of the three pillars’ outcomes are threatened, your business must also start and monitor corrective action. The path of operations management sustainability and supply chain management is to pursue social, economic, and environmental goals within the business operations and operational links that extend outside the firm to encompass the supplier chain and communities.
5 operations and supply chain management best practices
Applying technology
Applying a suitable solution is one of the best practices that a business can do to improve OSCM. For example, ERP software can be a good option to optimize the supply chain. However, you have to evaluate your current procedures to identify areas where technology can create some improvement, and then choose the software to fit those needs. The correct technology can help you obtain precise and thorough reporting data to make the best strategic planning decisions and performance measures.
Building relationships with suppliers
Even after you’ve closed a deal, you should continue to nurture and sustain these relationships. The finest interactions involve two-way communication between buyers and sellers. Your goals should be how to keep your relationships strong, keep them getting better, and resolve any disputes.
Being socially responsible
Reducing the carbon footprint of your supply chain is no longer just a great idea; it has become an important operations and supply chain strategy. Going green will help you reach more customers that take the environment into account when choosing providers besides increasing your overall efficiency. Additionally, it aids in supply chain management and logistics cost reduction since renewable energy seems to be much cheaper than fossil fuel energy. To improve supply chain best practices, more suppliers and service providers are required to submit specific information on the green initiatives they are implementing.
Prioritizing customer values
A key goal of an organizational structure is to put the interests and expectations of the customer first. When the market starts to change its focus, keeping an eye on consumer satisfaction and figuring out what needs to be done might be helpful. Businesses can develop closer ties with customers by looking into and measuring consumer perceptions and culture to build more enduring partnerships.
Communication coordination
A company’s productivity may rise with improved internal communication. When information is transmitted from one department to another with speed and accuracy, a corporation can work more rapidly and with more assurance that all necessary parties have the information they require to be productive.
Supply chain management or Operations management: Which is right for you?
Both supply chain management and operations management are important to the business and target the same goal. The supply chain involves sourcing and transporting both raw materials and finished goods. Operations management is the section in the middle where the product is made from raw materials. As a result, operations managers and supply chain managers are among the most desirable positions in the market today. It depends on what your major is, your ability, and your characteristics to decide which one is more suitable for you.
Operations managers can either oversee daily operations for a full company or a specific stage of the manufacturing process. Compared to the supply chain, operations emphasize the internal business more. Key choices about design, production, planning, workflow, and personnel are made by operations managers.
Compared to operations managers, supply chain managers are more outside-focused. Supply chain managers are required to comprehend dealing with suppliers, logistics, and customers all around the world in today’s global marketplace. They oversee purchasing, warehousing, forecasting, and important supplier decisions.
In general, operations and supply chain management play an important role in any business since production and goods delivery are the main business activities. When you have an efficient OSCM, your manufacturing and delivery process will go smoothly, with less lead time or wasted resources. As a result, your revenue increases considerably. Applying technology to your OSCM system is the most recommended way to get efficiency and help you stand out in the market.
FAQs
What are the main functions of SCM?
Supply chain operations management has 4 main functions in a business.
Purchasing
One of the key functions in supply chain management is purchasing. It deals with obtaining the raw materials and other resources needed to produce the goods.
Operations
Operations in supply chain management include planning, forecasting as well as warehouse arrangement. The company must estimate the potential demand for a product and the necessary output before issuing a purchase order for raw materials.
Additionally, operations management in the supply chain must effectively manage storage space to guarantee that they only keep critical items in corporate facilities. To avoid having too much or too little stock, they will need to plan both the availability of raw materials and completed goods very carefully. With multiple warehouses, warehouse management software is necessary to help you manage all the warehouses and stock in one central system.
Logistics
After the goods are manufactured, it requires space for storage before being transported for delivery. Logistics makes sure that deliveries go well and that products arrive at their destinations.
Resource management
Resource management allocate resources to the appropriate task at the appropriate time to maximize output while minimizing expenditures. In a business’s supply chain, effectively allocating individuals to different tasks is crucial to ensuring that all work is completed on time. Labor is crucial for moving goods and making sure that orders are carried out correctly.
What are the 3 aspects of operations and supply chain management?
The 3 main aspects of operations and supply chain management are purchasing, planning, and logistics. Purchasing deals with obtaining raw materials for manufacturing goods. Planning involves the estimation of needed manufacturing quantities following demand forecasting. Finally, logistics will take care of the delivery of goods from the warehouse to their destinations.
Is supply chain and operations management the same?
Even sharing the same goals, supply chain and operation management are different. Product operations management mainly controls the manufacturing process while supply chain management controls the supply of manufactured goods.
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