Running a company is a classic American dream. However, many aspiring entrepreneurs dive into this exciting but rocky journey without fully understanding what they are committing to.
Before launching your business, it’s necessary to assess whether you have the necessary skills and experience to succeed. This guide on operations and supply chain management process (OSCM) will help you understand these vital aspects of running a business.
What is Operations and Supply Chain Management?
Operations and Supply Chain Management (OSCM) encompasses all the management responsibilities involved in both Operations Management (OM) and Supply Chain Management (SCM). It covers a broad range of tasks, including:
- Raw materials procurement
- Inventory management
- Demand forecasting
- Production processes
- Shipping and delivery.
What is Operations Management?
Operations Management focuses on overseeing the daily activities required to produce and deliver goods and services efficiently. It includes managing production, packaging, shipping, safety protocols, staff training, process improvements, budget allocation, strategic production planning, and quality control. The primary goal is to enhance operational efficiency to improve customer satisfaction and experience.
What is Supply Chain Management?
Supply Chain Management (SCM) involves coordinating the sourcing of materials from external vendors, tracking deliveries, and managing the flow of materials to ensure they reach the right areas for production, packaging, and other internal processes. The main objective of SCM is to optimize the supply chain to add value to procurement, manage inventory efficiently, and ensure a smooth flow from raw material sourcing to customer order fulfillment.
Operations vs. Supply Chain Management
It’s fair to say that Supply Chain Management is a significant component of Operations Management. While SCM often has its own dedicated manager, this role may or may not report directly to the Operations Manager or a higher authority, such as a Chief Operations Officer (COO).
Both Operations Management and Supply Chain Management are critical to achieving long-term business success and building a reputable brand. When managed effectively, they help avoid issues like inconsistent workflows, cost overruns, poor product quality, unsatisfactory customer experiences, and employee frustration.
The Importance of Operations and Supply Chain Management
An OSCM system controls production processes, materials, and the inventory of finished products. The outcome in customer experience, cost metrics, and profit margins indicate the efficiency of those functions. Some of the critical effects of OSCM include:
Operational Efficiency
Optimizing operations leads to reduced costs and increased productivity. Management focused on streamlining the supply chain and operational processes improves systemic efficiency. Planning and managing all these critical areas of functioning can eliminate redundancy and reduce waste of resources (time, money, materials), creating cost savings and increasing profits.
Competitive Advantage
A company can leverage efficient supply chain and operations management to gain a competitive edge. Smooth coordination between relevant internal departments and with external suppliers, effective collaboration, inventory, cost controls, and other strong OSCM strategies can increase cash flow and empower businesses to focus on quality, innovation, customer experience, and growth plans.
Customer Satisfaction
Effective supply operations and chain management ensure timely delivery and quality control. A critical result of that is a strong customer satisfaction rate. Proper supply chain operations management is a known quantity in terms of its predictably high impact on that ratio. Similarly, efficient operations management results in improved quality, better service, higher satisfaction rates, and increased rates of repeat sales.
Key Components of Supply Chain and Operations Management
In larger companies, operations management and supply chain management are separate roles, though the Supply Chain Manager may report to the Operations Manager. It’s important to know the differences in the sets of functions within each of the two management areas.
Operations Management Components
- Process Management. The Operations Manager runs and evaluates operations and implements process improvements as needed to maximize productivity and quality and minimize safety risks and costs.
- Product Design and Development. The Product Manager and their team develop new products and conduct functional, safety, and consumer research.
- Quality Control. Systems for quality management and controls on individual product units are often maintained under the direction of a QC manager.
Supply Chain Management Components
- Procurement and Supplier Management. Rates and contract term negotiations, Purchase Order approvals for materials, and cultivation of reliable relationships with providers are supply chain management responsibilities.
- Inventory Management. Among inventory management tasks are ordering, warehousing, tracking stock levels, turning over inventory, and recommending new stock types.
- Logistics and Distribution. Organizing and executing the distribution of production materials and supplies needed for manufacturing finished goods is an SCM responsibility.
Challenges in Operations and Supply Chain Management
Either of these two sets of responsibilities, on its own, is a very complex undertaking with a vast range of entailments. Combining the two roles into one is a daunting proposition, not for the uninitiated. Here are some of the primary difficulties typically confronting OSCM leaders:
Adequate Staffing
Building an effective team is essential to an organization’s sustainability and growth potential. Employees who strive to learn, exceed expectations, innovate, and strengthen the team are very valuable. However, attracting and inspiring such people to a company has become increasingly difficult over recent decades and has become perhaps today’s biggest management challenge.
Planning
Everything that is managed in operations and the supply chain is addressed in planning. There have to be strategic plans for:
- Systemic optimizations
- Budgeting
- Material costing
- Production forecasting and goal-setting
- Pricing
- IT solutions
A wide range of potential process improvements, vendor relationship-building efforts, training programs, quality initiatives, and other objectives across the board require sound OSCM planning.
Resource Allocation
Effectively managing human and material resources ensures they are available when needed, optimizing processes, boosting productivity, and reducing costs. This also helps keep work on schedule. Consistent and strategic allocation of materials and labor directly impacts productivity, revenue, customer satisfaction, and brand reputation.
Digital Transformation
Using the latest software systems and advanced business technologies helps achieve full-scale automation of everything that can be automated throughout the OSCM processes. Digital transformation empowers business managers to:
- Maintain real-time data tracking
- Boost data management capabilities
- Improve interdepartmental collaboration
- Simplify lead nurturing
- Streamline process management, and so much more, company-wide.
Supply Chain Disruptions
Natural disasters, political instability, economic downturns, pandemics, and other external problems can impact supply chains. Even simple shifts in consumer needs or global conditions can have an effect.
The risks to operations and supply chain management objectives are always exacerbated by the above factors. An Operations and Supply Chain strategy manager must generate the most meaningful forecasts and prepare corrective measures.
Customer Service Quality
In a customer-centric company, optimizing Operations and Supply Chain Management (OSCM) focuses on enhancing customer support and satisfaction. Delivering high-quality products at the right price, along with exceptional customer service, creates a superior experience that customers value and trust. Satisfied customers are more likely to recommend a brand to friends, family, and colleagues. This is how a brand distinguishes itself in a crowded marketplace.
Sustainability and Ethics
Today's consumers and business leaders are increasingly driven by ethical considerations, seeking alignment between their values and their commercial engagements. Social, economic, and environmental sustainability are virtually universal priorities for both parties to a purchase transaction in today’s marketplace.
Operations Management must consider how the company’s activities are impacting these elements of ethical concern. They should be ready to implement solutions in the interest of the community, the larger economy, and the global environment.
Best Practices for Operations and Supply Chain Management
Optimal supply chain and overall operations efficiency can raise productivity, reduce costs, and cut waste. Those achievements lead to greater customer satisfaction and a stronger brand reputation. These are some key best practices for OSCM:
Lean Manufacturing
The lean manufacturing process focuses on increasing efficiency and reducing waste. Its core principles revolve around enhancing the value of products and services by streamlining workflows. This often involves demand planning to eliminate delays and starting work based on actual demand rather than arbitrary triggers.
Lean program leaders play a key role in identifying opportunities to make operations more efficient. For example, Just-In-Time (JIT) manufacturing reduces inventory costs by producing goods only when needed.
Supplier Relationship Management
Building strong, reliable supplier relationships means cultivating a sense of mutual benefit. Continue to nurture your important vendor relationships. The best vendor interactions are between parties operating in good faith toward fair and mutually helpful outcomes.
Keep in contact. Thank them for their help. Reciprocate. Get to know them professionally. Work out disputes fairly and respectfully.
Risk Management and Contingency Planning
Operations and supply chain processes are filled with risks. To manage these effectively, managers need to identify potential issues and losses, explore risk mitigation strategies, and implement preventive measures.
Risks can come from various sources, such as external factors that affect timely deliveries or internal issues like claims and disputes. Collaborate with a risk management expert to thoroughly assess these risks and ensure your business is properly insured.
Adopting Advanced Technologies
AI, machine learning (ML), equipment designed for enhanced functioning via the IoT, and other OSCM technologies, can help achieve effective supply chain management and general operations. Updating technologies is a critical infrastructure improvement.
You don’t have to be the same size as your largest competitors to win in your market with your smaller team. You can compete head-to-head with them, cheaper and more effectively, by having the same grade of advanced technology.
Aligning with Customers’ Values
Placing the customers’ interests at the center of all business operations and processes involved in OSCM is the hallmark of great management. Such leaders of business teams understand how the market works.
When there is a notable shift in the market, they’re ready to identify new benchmarks for maintaining customer satisfaction. They lead their entire organization to adapt accordingly, methodically moving to retool and retrain their teams as needed.
The Future of Operations and Supply Chain Management
The two areas of management share the company’s goals, but they involve different sets of responsibilities. Manufacturing operations management is focused on production processes, whereas supply chain management – on materials procurement and controlling inventory of finished goods.
General operations management may encompass all of the above. Whatever the role dynamics, forward-thinking leaders should look to the future and form their best strategies for long-term success. Those plans should include:
Continuous Learning and Adaptation
The most successful business managers typically describe themselves as life-long learners. They practice active listening (which is a skill that pays many kinds of benefits in business). They read industry magazines and books, take courses, and endeavor to stay informed about industry changes and innovations. They’re aware of new technologies of all types relevant to their business and its future.
Investing in Technology
Business managers in Operations and Supply Chain Management should invest in updated technologies to optimize OSCM. Assess your existing hardware and business software platforms, programs, and procedures. Determine what improvements are most critical to add and put the necessary upgrades and training into place.
Data management and reporting programs are strongly recommended as optimized strategic planning and decision-making tools. Other advisable tech upgrades:
- ERP. Use a full Enterprise Resource Planning platform with an integrated CRM.
- CRM. At least use a stand-alone updated Customer Relationship Management platform.
- Automation. Employ software tools and procedures to automate all processes possible.
- AI & ML. Upgrade to much more competitive information processing technologies.
- Telecom. Use communications systems that fully integrate with new business platforms.
Building Agile Teams
Even today, with all the tools for the fast execution of many tasks, there is still a pervasive lack of clarity on what an agile team is. Building an agile team requires going beyond good hiring and relentless training. It’s about developing a team that can reflexively respond to unexpected issues and adapt to maintain optimum productivity and quality.
Agile teams are innovative. That’s how they accomplish those results. But, there’s more involved than rote conditioning. Team members must be confident that they will be welcomed into collaborations, and that they are working in an environment where risks don’t imply fear of failure or consequences.
Wrapping Up
The importance of effective operations and supply chain management cannot be overstated. As you can see from the expanded outline above, it is a broad field of study. You are well advised to learn as much as you can as you go along, adopt retail management best practices, and keep informed about future technology and process trends in retail marketing for your location and business type.
