Supply Chain Manager Career: How Does It

Differ from an Operations Manager?

How They're Alike

These two job titles are often used interchangeable.

The two career fields are interdependent with each other.

These two job titles are often used interchangeably and while they do indeed share many
common traits, they each have a set of roles and purposes that are entirely unique. Some of the
confusion stems from the fact that the two career fields are interdependent with each other.
While that may be true, a supply chain manager career would be considered a subset of an
operations manager career because it is just one part of the entire production operation. But they
do share a similar end goal: to enhance the bottom line by reducing costs and increasing
efficiency. How they achieve this is very different, nonetheless.

Operations Management is Internally-focused

Operations management focuses primarily upon activities that happen within a company's walls
to manufacture a product or service. This includes formulating policies, managing the daily
operations and workflow, overseeing workers, and participating in the design, planning and the
physical production of the product. In short, it's the giant bucket that contains all of the smaller
buckets of jobs necessary to complete the goal.

Those who earn an operations management degree are skilled in problem-solving and leadership.
As an operations manager, you'll plan and direct the operations of a company or organization.

Operations managers decide how facilities should be laid out, formulate products and policies,
control inventory and distribution, drive logistics, and create employee schedules, among other
duties.

In some organizations, the duties of an operations manager may overlap with those of the CEO.
Supply Chain Management Is Externally Focused

Supply chain managers work with external partners to procure parts and raw materials needed to
produce the product, create the inventory, and sell the product to outside markets. These
professionals evaluate suppliers and negotiate contracts with vendors. Because this role is a vital
necessity, you can see why supply chain management lives under the umbrella of operations
management. Without materials, there are no products to manage and no need for workers to
make the products.
Operations and Supply Chain Management
Operations and Supply Chain Management (OSCM) includes a broad area that covers both
manufacturing and service industries, involving the functions of sourcing, materials
management, operations planning, distribution, logistics, retail, demand forecasting, order
fulfillment, and more.

It covers everything along the path goods travel from suppliers to eventual consumers.

Every environment from government to banks to schools to hospitals either consumes or sells
items, and they need raw materials or product with which to work.

A supply chain is involved in processing or using these materials or even providing services to
customers using these materials. Professionals in these fields also work with processes and
increasing efficiencies with processes. Operations and supply chain professionals have a place in
all of these environments.

Consider environments where there are large volumes of movement; movement of people,
product, raw material, data, money or consumers. This occurs in almost any environment and
any industry.
Operations and Supply Chain

In smaller organizations, there can be overlap between operations and supply chain management.
One person or department can manage or play a role in both supply chain and operations. In part
this is because Supply Chain Management has become more complex over time and the demand
for highly trained professionals has emerged. Previously, the roles in SCM were handled by
Operation’s professionals. Both positions require leadership, goal setting, organization, finance,
and decision making. Managers in both areas oversee people, parts, and supplies. They both
require the ability to communicate across departments internally and externally, to lead people
and teams, and to manage human capital.

If you’re a skilled engineer or technician, but need to add these skills, a master’s degree in
operations management or supply chain management provides the information, training, and
knowledge needed.

But how do they differ?

“Overall, supply chain is sourcing and moving both the raw materials and the finished product.
Operations management is the part in the middle where the product is created from the raw
materials. Supply chain is how you get it and get it to customers. Operations is how you make
it,”.

What is Operations Management?

Depending on the size of the organization, operations managers manage day-to-day operations
for an entire business or they may manage a specific part of the production process. Operations
has a more internal company focus relative to supply chain. Operations managers make key
decisions on design, production, planning, workflow, and staffing. Typical responsibilities
include:

 Directing and coordinating production, pricing, sales, or distribution of products

 Managing finance activities including sales and other data
 Evaluating performance data to make appropriate decisions regarding productivity, cost control, and
improvements
 Managing staff, work schedules, and assigning specific duties
 Directing and coordinating budget activities
 Determining products to be sold based on forecasts of customer demand

What Is Supply Chain Management?

Generally, supply chain managers work more externally than operations managers. In today’s
global market, supply chain managers are expected to have an understanding of working with
suppliers, logistics, and customers all over the world. They make key decisions on suppliers,
coordinate purchasing, warehousing, and forecasting.

Supply Chain manager duties may include:

  Forecasting demand for materials or products
 Creating supply plans to ensure availability of raw materials
 Evaluating suppliers and determining the effectiveness of multiple supplier strategies
 Evaluating risks to supply chains and suppliers as well as troubleshooting issues in the chain
 Analyzing inventories to determine how to increase inventory turns, reduce waste or optimize customer
service
 Managing activities related to purchasing, inventory control, and warehousing
 Coordination of supply chain with other functional areas, such as sales, marketing, finance, production
or quality assurance
 Manage supply chain staff

Supply chain students focus on global markets, global supply chains, quality control, inventory
control, transportation and logistics, decision modeling, forecasting, and designing value into the
supply chain.

While operations managers and supply chain managers lead different areas of an organization,
they are both called to contribute to the value of the business. Learning effective strategies to
implement agile, profitable, efficient, and productive systems point to a more successful bottom
line.
What is the Difference Between Supply
Chain Management and Operations
Management?
Understanding the the difference between supply chain management (SCM) and operations
management (OM)begins by getting a solid grasp on how they’re both specifically defined. The
following are some of the most basic elements that define and differentiate these closely-related
but slightly distinct terms.

Managing the Supply Chain

The supply chain concerns the specific goods and services that a business supplies in order to
meet the demand of the market. The “links” in this chain are priorities such as raw material
transportation, inventory storage, and delivering the final product from the manufacturing facility
to the customer.

The path of manufacturing and delivery that threads through the acquisition of raw material, to
the company’s manufacturing facility, to the final point of customer consumption is what forms
the complete “chain”, and the managers of these supply chains are counted on to have it flow it
as smoothly as possible. The more efficiently this chain is managed, the less disruptions there
will be in the company’s ability to prepare and supply its product in a timely manner.

Resource: 15 Best Online Master’s in Supply Chain Management Degrees 2017

Managing Operations

If you consider SCM to be a chain that stretches out from the company’s manufacturing facility
and into its customers’ homes, then OM can be considered a circular railroad track that circulates
around the interior of the company’s facilities. Whereas a large part of SCM externally-based,
OM is a fundamentally internally-based aspect of the company’s manufacturing process.

With high-quality OM practices, every essential operation that a company needs to conduct in
order to remain functional and profitable as a goods provider can be consistently and efficiently
accomplished on a regular basis. OM is a matter of making sure that the company’s internal
workflow is optimized to the point of maximum effectiveness, from the productivity of the
workforce to the conversion of the company’s raw material stores into product inventory.

Comparing and Contrasting SCM to OM

There are naturally a few areas where SCM and OM overlap in the manufacturing and delivery
process. Both SCM and OM practices are relevant to the storage of raw material and physical
production of products. Rather than imagining the pathways of SCM and OM as intersecting
tracks, it would be more accurate to envision the both of them as a single original pathway that
eventually splits off into two diverging directions when it nears the product delivery stage.
While the SCM path extends out of the manufacturing facility to meet the company’s customers
far away with finished products, the OM path remains within the facility and circulates to
monitor interior workflow and ensure that things remain on track. Eventually, the SCM path
rejoins the OM path as they converge once again at the raw material stage of the next
manufacturing cycle.

When OM and SCM form one cohesive process of managing both supplies and overall operation
fluidity, they are collectively referred to as OSM. The slight difference between the textbook
definitions of these two aspects of manufacturing doesn’t mean that they’re fundamentally
independent from one another. The two terms simply indicate separate yet occasionally shared
layers of a company’s manufacturing process.

Depending on the nature of the company’s needs, slightly distinct skill sets may be required of
those hired to oversee primarily OM or SCM-oriented tasks specifically; nevertheless, the roles
of all personnel involved in either OM or SCM will undoubtedly depend upon one another’s
cooperation in order for the roles to be fulfilled smoothly. A coherent, consistent and productive
line of communication between all of a company’s supply managers and the operation
management specialists will be vital for the entire company’s manufacturing and delivery
efficiency.
5M money, manpower, methods, materials, and machinery.

7 Muda slide?

Efficiency and effectiveness

Service Science
an interdisciplinary approach to the study, design, and implementation of service systems – complex systems
in which specific arrangements of people and technologies take actions that provide value for others.
(http://www.aol.com/stock-quotes/).
The Differences Between Logistics,
Operations and Supply Chain Management

Gwynne Richards
22nd October 2018

Logistics, operations and supply chain management are similar, but different, roles. However,
when asked to explain these differences, it can often be quite difficult to do so as the roles are so
heavily intertwined. First, let's look at some industry definitions...
What is Supply Chain Management?

According to the Council of Supply Chain Management Professionals (CSCMP) the definition of
supply chain management (SCM) is as follows:

Supply chain management encompasses the planning and management of all activities involved
in sourcing and procurement, conversion, and all logistics management activities. Importantly, it
also includes coordination and collaboration with channel partners, which can be suppliers,
intermediaries, third-party service providers, and customers. In essence, supply chain
management integrates supply and demand management within and across companies.

What is Logistics Management?

The CSCMP then define logistics management as:

...part of supply chain management that plans, implements, and controls the efficient, effective
forward and reverse flow and storage of goods, services and related information between the
point of origin and the point of consumption in order to meet customers' requirements.

What is Operations Management?

The Business Directory definition of Operations Management is:

The design, execution, and control of operations that convert resources into desired goods and
services and implement a company's business strategy.

What are the Differences (and Similarities)?

Operations management tends to be associated more with the production of goods as opposed to
the movement of goods. However, some would say that operations management is the basis of
both supply chain management (SCM) and logistics. As operations management is about turning
inputs into outputs we can also include services in this and not confine ourselves purely to
production. The inputs themselves can include anything from materials, equipment and
technology to human resources including drivers and warehouse operatives.

There have been occasions where the terms logistics and SCM have been interchangeable.
However, in my view, SCM is all-encompassing whereas logistics, as defined by The Business
Directory, is more about the storage and movement of goods.

There are strong parallels between the skills required for effective operations management and
those needed in both logistics and supply chain management. Excellent organizational skills are
crucial in improving efficiency and driving productivity as an operations manager.

Improved productivity is required in freight vehicle operations and warehouse processes and all
along the supply chain in order to ensure the profitability of a company.
According to Tim Dhoull, “an operations manager needs to understand the series of processes
within a company in order to get them to flow seamlessly, and in this sense, the role is directly
related to supply chain management. The coordination involved in setting up these processes in
practice represents logistics; the combination of understanding and coordinating the work of a
company are therefore central to a successful operations manager”.

Although there are differences, these terms and roles are very much inter-related and in order to
be profitable in this competitive age, companies must have an experienced and effective team of
supply chain, logistics and operations managers.
When describing the roles and responsibilities that Operations Management and Supply Chain Management
entail, it can be a little confusing to differentiate the two areas because there are so many similarities
between both disciplines. Both disciplines are part of a larger organizational structure and many functions
can overlap as part of normal business processes. Sometimes the people in both functions can have
multiple roles that touch on both areas. Additionally, the supply chain can also be described as a supply
chain web. This is because the academic model of a supply chain consists of a primary organization with
vendors feeding it, and it feeding customers. However, in reality an organization will have many vendors
and many customers. Those vendors will interact with others customers and even those customers will be
vendors to the original customer. Just think of a copy paper supply chain. Pulp vendors supply pulp to
paper manufactures. These manufacturers make the paper and through its supply chain, the copy paper
will be sold to retail stores. Then the original pulp manufacturer’s office staff will visit the office supply retail
store and buy copy paper for their own use.
The Operations management discipline consists of the management of those processes inside the supply
chain that increase the economic value of the supply chain. Operations management takes resources and
uses them to accomplish business goals while taking into consideration the needs of all stakeholders. The
supply chain encompasses the components that convert raw materials into finish goods. However,
operations management determines the processes how those raw materials are converted. The biggest
difference between supply chain management and operations management is the supply chain
management is externally focused dealing with vendors and customers, and operations management is
internally focused concentrating processes inside the company’s walls.
By Robert Volker

Supply Chain Management and Operations Management are two terms that are
often, and easily, confused. Supply Chain Management is concerned with strategic
choices, sharing of information and resources, coordination of logistics, and capacity
to optimise the cost-effective creation of value along a supply chain.

Operations Management, on the other hand, covers the activities, decisions and
responsibilities of managing the resources that are dedicated to the production and
delivery of products and services.Many characteristics of Operations Management
overlap with Supply Chain Management, yet they remain separate processes in an
organisation.

It can be said that Supply Chain Management is part of Operations Management

because Operations Management includes all activities relating to the provision of a
service or manufacturing of a product. However, there are distinct differences
between the two fields, namely:

? Supply Chain Management aims to cut out inefficiencies in the chain, and
increase profits by reducing costs. Operations Management has a larger set of
activities engaged with controlling and monitoring every aspect of the processes
used in the manufacturing of aproduct.

? Supply Chain Management is about getting material in and out of a factory,

and making sure the right parts are coming in from the suppliers in the correct quality
and quantity. Operations Management is concerned with what is done with these
materials inside the factory.

? Supply Chain Management focuses on activities independent of the type of

business you are conducting. Operations Management is concerned with the type of
business your organisation conducts and how well you are able to carry out these
activities.

? Supply Chain Management revolves around the activities that take place
outside of acompany. Operations Management takes place internally.

Both Supply Chain Management and Operations Management are essential to a

business?s success. Knowledge of these two fields of management can assist
companies in gaining awareness of how they can grow and develop. Both fields are
concerned with ensuring that a business runs efficiently and effectively, and that
resources brought to a company, and used within the company, are of an excellent
quality.

Be equipped with the necessary knowledge and skills to enter these fields with
the University of Cape Town Operations Management short course or the University
of Cape Town Supply Chain Management short course. The courses are presented
part-time and entirely online by the University of Cape Town, in partnership with
online education company, GetSmarter.

Operations Management is a broad field concerned with managing processes for transforming
inputs into useful outputs and distributing these to consumers. It follows that it touches all
manufacturing and services in an economy. Its key goals are efficiency and risk reduction.
Therefore it accommodates significant levels of quantitative or mathematical techniques for
optimization of processes and resources.

Supply Chain Management is a topic of study/practice within the overall field of Operations
Management. SCM is concerned with organization of activities that fall outside the
manufacturing boundary, such as distribution/transportation and coordination with suppliers and
trading partners. SCM therefore connects all activities from source raw materials right upto the
finished goods in the hands of the consumer.
he following is my answer as I explain the concepts in my PhD thesis.
Until recently, many consultants, academics, and practitioners had viewed Supply Chain
Management (SCM) as Logistics Management. To make a clear distinction between the two
concepts, the Council of Logistics Management (CLM) in 1998 revised its old definition of
logistics management. The revised definition of logistics is:
Logistics is that part of the supply chain process that plans, implements, and controls the
efficient, effective flow and storage of goods, services, and related information from the point-
of-origin to the point-of-consumption in order to meet customers’ requirements.
The Global Supply Chain Forum (GSCF) has defined the SCM as:
Supply chain management is the integration of key business processes from end user through
original suppliers that provides products, services, and information that add value for customers
and other stakeholders.
Drawing on this definition, the goal of SCM is to meet customer needs by supplying the right
product at the right place, time, and price.
All in all, we can conclude that SCM is broader concept, which includes all operations between
two given points of the chain with an aim to add value for both customers and shareholders.
Examples of such operations are upstream and downstream activities like procurement,
inspection, inventory, production, quality control, sales, marketing, warehousing, and
distribution.
Supply Chain Management vs Operations Management

Supply Chain Management and Operations Management are two terms that are often confused
by managers in big organizations. There are many similarities and overlapping in between these
two concepts yet there are differences for them to exist as two distinct processes in an
organization. This article will highlight these differences so as to enable a better understanding.

In the simplest of terms, Supply Chain management (SCM) is what happens outside the
company, whereas Operations Management (OM) is what happens inside a company. However,
the two terms are closely linked to each other and heavily dependent on each other also. In
general SCM is considered to be a part of OM as OM includes all activities in the context of
manufacturing a product or providing a service. SCM is the control and monitoring of
procurement and use of material and equipment required to manufacture a product. The end
objective of SCM is to cut out inefficiencies in the chain, reduction of costs and thus
improvement of profits.

OM on the other hand is a larger set of activities that includes SCM as it is engaged with
controlling and monitoring every aspect of the processes used to manufacture the products made
by your company. SCM is getting material in and out of the factory whereas OM refers to what
you do with the material inside the factory.

In a nutshell, SCM is a collection of activities that are basically independent of the type of
business you are conducting. Supply chain basically remains the same as you buy raw material,
stock it, you transform it into final product, you stock again and finally sell the products.
Operations management is actually what you do with the raw material and how well you do it. It
is different for different businesses and makes use of human resources and machinery to
manufacture finished products.

In brief:

• Supply Chain management and Operations

management are similar and confusing terms in any
organization

• While SCM pertains to activities outside the

factory, OM refers to all that goes inside the factory

• SCM is a part of OM
Every day, around the world, businesses of all sizes are collaborating to produce and deliver the
goods that consumers need through a vast, interconnected series of processes. Each of the
companies involved along the way utilize both supply chain management and operations
management in producing goods.

The terms supply chain management and operations management is often confused. They do
have similarities, but their differences make them completely separate processes.

If you’re interested in a career in the business world, it’s important to learn what these two terms
mean and how companies use supply chain management and operations management to improve
efficiencies and increase value for their customers, while maximizing profits.

Supply Chain Management

Supply chain management is a discipline that came about as companies began to see the supply
chain as one entity, rather than separate pieces of a puzzle. Effective supply chain management
controls costs and ensures efficiency, from the point of origin of raw materials or components,
through the manufacturing process and delivery to the consumer.

One distinct difference between supply chain management and operations management is
that supply chain management is focused externally. Its focus is on:

 Planning products that consumers will want to buy

 Sourcing raw materials, components or parts
 Transporting and warehousing products
 Delivering the goods to the point of purchase

When costs are out of line, or inefficiencies are discovered along the supply chain, the supply
chain manager must step in and negotiate better pricing, find alternative sources or solve the
issues causing the inefficiency.

Supply chain management professionals need a broad foundation of business knowledge as well
as specialized skills, which can be obtained through an MS in Supply Chain Management
program. With coursework including
managerial accounting, supply chain management, material acquisition, and global supply chain
management and lostics, this advanced degree program is a great choice if a career in supply
chain management interests you.

Employers all over the globe are recruiting skilled supply chain managers. Great opportunities
can be found with software and technology companies, petroleum and chemical companies,
utilities, retailers, manufacturers and more.

Operations Management

The two disciplines of supply chain management and operations management are closely linked
and dependent upon each other. In most organizations, supply chain management is part of
operations management. But one contrast between supply chain and operation management is
that operations management occurs internally.

Operations managers work with various departments toward common goals – such as making
sure the company’s products are manufactured according to specifications, packaged properly,
sold to the right retailers and marketed successfully.

Whether they’re working for a restaurant chain, a healthcare system or an automobile

manufacturer, operations managers share many duties, including:

 Forecasting sales
 Improving productivity
 Increasing responsiveness
 Meeting customers’ demands
 Maintaining quality standards
 Contributing to the bottom line

Operations management can be strategic, tactical and operational. For example, an operations
manager may be responsible for determining where a manufacturing plant is located, or the
structure of a communications network. Designing the physical plant and selecting equipment
may come under their direct supervision, along with managing inventory and monitoring quality
control.

Operations management careers can be found in a wide variety of industries and businesses.
Landing a job typically requires a strong understanding of business essentials, as well as the
fundamentals of operations management – all of which are covered in an MS in Supply Chain
Management degree program. Earning this respected credential can give you an advantage over
the competition when pursuing operations management positions.

The major difference between supply chain management and operations management is that
supply chain is mainly concerned with what happens outside the company – obtaining materials
and delivering products – while operations management is concerned with what happens inside
the company. Your first steps to either of these exciting careers is determining your career goals,
and then planning your educational path, so you’ll be better prepared to reach them.

Interested in Florida Tech’s M.S. Supply Chain Management program?

If you've decided to pursue a career in business and desire a position in management, then you
may have discovered a variety of management specializations. Two options, operations
management and supply chain management; however, can be easily confused and may
sometimes overlap. While their corresponding degrees may be offered as concentrations or
specializations within a broader business management or administration program, understanding
the differences between both is important when deciding between the two.

The duties and responsibilities involved in operations management vary in activities and
processes to help a company run smoothly. The scope of supply chain management; however, is
more specific and limited to the production, packaging, warehousing and distribution of products
and other inventory.1,2

When researching both degree specializations, consider the differences and what to expect in
courses and skill sets for each.

What is Operations Management?

An operations manager plans, directs or coordinates the operations of public or private-sector

organizations. Depending on the size of the company and the scope of the product and service
offerings, operations management may involve a specific set of processes or may extend to the
entirety of a company's operations.1

Job Responsibilities in Operations Management

Operations managers must understand and oversee the processes through which a company
offers products, services customers and maintains profitability. An operations manager may be
tasked with:1

 Directing and coordinating activities of businesses or departments concerned with the production,
pricing, sales or distribution of products;
 Reviewing financial statements, sales and activity reports and other performance data to measure
productivity and goal achievements, and determining areas in need of cost reduction and program
improvement;
 Managing staff, preparing work schedules and assigning specific duties;
 Directing and coordinating an organization's financial and budget activities to fund operations,
maximize investments and increase efficiency;
 Determining goods and services to be sold and setting prices and credit terms based on forecasts of
customer demand.

Operations Management Job Skills

Operations managers direct and coordinate activities involving employees and/or departments,
and are aware of a company's products, services, internal technology systems and sales and
distribution practices. Operations managers may need administrative and managerial skills as
well as the ability to learn and use industry-specific practices and technology.1

If you pursue an operations management specialization, courses may include:

  Cost Control Management,
 Global Operations Management,
 Production Planning and Quality Management,
 Supply Chain Management and Purchasing,
 And Strategic Manufacturing Policy.

What is Supply Chain Management?

A supply chain manager directs and coordinates production, purchasing, warehousing,

distribution and/or financial forecasting activities for a company or organization. Depending on
the position, a supply chain manager may evaluate and streamline these activities to ensure
quality control and maximize profitability.2

Job Responsibilities in Supply Chain Management

A supply chain manager may be tasked with:2

 Coordinating with supply chain planners to forecast demand and create supply plans that assure the
availability of materials or products;
 Monitoring forecasts and quotas to identify changes or to determine their effect on supply chain
activities;
 Analyzing inventories to determine how to increase inventory turns, reduce waste and improve
customer service;
 Managing activities related to strategic or tactical purchasing, material requirements planning,
inventory control, warehousing and/or receiving;
 Developing procedures for coordination of supply chain management with other functional areas, such
as sales, marketing, finance, production and quality assurance.

Supply Chain Management Skills

Supply chain management involves optimizing the processes through which goods and services
are produced and distributed, and requires familiarity with a range of planning and distribution
software, production technology and personnel management. Depending on your position and
industry, key supply chain management skills may include:2

 Modeling and enterprise resource planning (ERP) software,

 Personnel and human resources experience,
 Knowledge of production and processing technology,
 Project management software (such as Microsoft Project and SharePoint),
 And purchasing and logistics planning systems.
Youtube

https://www.youtube.com/watch?v=lZPO5RclZEo
https://www.youtube.com/watch?v=NkMhX1pl6r8
https://www.youtube.com/watch?v=byDoP3lxtJw
https://www.youtube.com/watch?v=zqaGqPJJnvA

Series of lectures
https://www.youtube.com/watch?v=ZNLaoFdcCPs&list=PL040D2F9406691BE6
Emerging Trends

Supply chains around the world are being transformed. External pressures, technology trends and
internal evolution are prompting companies to reevaluate their network to determine how their
future supply chain should be structured, both in terms of capacity and capabilities. What should
you do now? A good first step is consider the broad ongoing trends that will impact the supply
chain of the future. These can be grouped into four main categories:

1. Emerging technologies
2. Focus on supply chain visibility
3. Sharing economy
4. Evolving customer channels

Let’s take a look at each in a little more depth.

Emerging technologies: Drones, autonomous intelligence and robotic automation will

eventually transform warehousing and transportation, which will create networks that may look
and operate very differently from those of today.

IR 4.0, IIoT, Block Chain, 3D printing, AI/Machine Learning

Green manufacturing

Circular Supply Chain

Modern supply chain entities must be willing to transition to a circular supply chain, which
includes the entire reverse logistics process, in order to continue to grow and become sustainable
in a future without an unlimited supply of resources.

e.g. Car batteries, Old Car (15 years - in India)

NetFlix
Rolls Royce
Rolls-Royce engines are not purchased but leased. As a result, Rolls-Royce is directly responsible for all
installation, maintenance, and reclamation processes on the jet engines, eliminating the possibility of the
engines being tossed in the trash.

Focus on supply chain visibility: The Internet of Things, Big Data and data transparency will
improve organizations’ ability to gain visibility on the real-time status of their supply chain
network, thus giving them the ability to not only rapidly respond to problems but more
importantly, anticipate and prevent them more effectively. Data abundance will be used to draw
insights on both short-term and long-term improvements to the supply chain and beyond.
Sharing economy: On demand warehousing and on-demand logistics will allow organizations to
be more flexible in how they operate their supply chain. Lower Capex and higher adaptability
will likely be attractive for organizations that are in rapidly evolving industries.

Evolving customer channels: There is an ongoing shift away from traditional retail to direct-to-consumer
shipping. Consider that 40% of brands now sell directly to the consumer, and that those DTC sales are
projected to reach $130 billion by 2025. This requires a supply chain with different capabilities than those in
place today.
Product cost is not material cost
Value Chains vs. Supply Chains
Nicole Garman Oct 17, 2018

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Interconnections. Logistics. Conversions. When we start talking about the integrated systems and
processes that form modern supply chains, no aspect or actor can be discounted. The full
spectrum of business operation — sourcing, procurement, conversion, and logistics — directly
affects how our goods and services find their way to a final destination.

The nuances of these supply chains impact every product on the market, from lobsters to
Lamborghinis. As demand continues to grow and new technology disrupts the market daily, the
question for supply chain management is no longer whether systems will change, but how. And
that’s where the rich potential of modern value chains makes all the difference.

What Is a Supply Chain?

The concept of a supply chain is relatively simple, though its execution may not be. Supply
chains are based in processing; creating, manufacturing, stocking, transporting, and selling are all
key aspects of a supply chain.

By definition, a supply chain incorporates every step of a company’s function, from receiving to
filling customer requests. A supply chain comprises the sequence of processes by which
businesses produce and distribute commodities. Every team in a company is part of the supply
chain: product development, sales and marketing, operational management, distribution, and
even finance and customer service.

While specific procedure and the management strategy behind it vary dramatically from industry
to industry — and company to company — the flow can typically be broken down into five
essential elements:

 Creating, planning, developing, designing, and troubleshooting new products

 Sourcing the fundamental parts, materials, and components for manufacturing
 Manufacturing and production
 Storage and delivery, whether in a brick-and-mortar retail setting or online
 Customer management and returns

Some supply chains even create circular systems, establishing easy steps for consumers to
recycle, resell, or reinvent a product after its original use is exhausted.

What Is a Value Chain?

A value chain also relies on the process of creating a product and satisfying a customer — in
fact, a value chain incorporates the same elements as a supply chain. However, the key emphasis
of a value chain is not simply executing; instead, it’s centered on creating a competitive
advantage.

A value chain can be broken down into five steps very similar to those involved in the supply
chain, but with a different focus:

 Inbound logistics, including receiving, inventory management, and sourcing

 Operations, or making the product
 Outbound logistics, including shipping, packaging, and delivery
 Sales and marketing (connecting with buyers)
 Support and service

In the value chain, every step of the process centers on a single goal: Increase value to the
customer, or increase the company’s advantage in the marketplace. Either way, all involved
parties benefit.
Blockchain Reaction

We’re working in fascinating times. Supply chain management tools are advancing rapidly, and
trends shift every day. We’re talking drones, electric trucks, and self-driving vehicles, and that’s
just in the last mile of delivery!

The challenges presented by the value chain require savvy analysis and a willingness to remain
nimble; today’s suppliers must do more than simply deliver or upgrade their services, they must
also strategize how to do so in the best possible way. Sometimes this means outsourcing when
it’s least expected, or investing in new analytics to streamline everyday tasks.

The Value in the Value Chain

Embracing the value chain allows for the creation of systems that can handle complex operations
beyond basic logistics. But first, it’s crucial to develop a solid understanding of how supply
chains differ from value chains.