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Operations Management
Operations management is an area of business concerned with the production of goods and services, and
involves the responsibility of ensuring that business operations are efficient in terms of using as little
resource as needed, and effective in terms of meeting customer requirements. It is concerned with
managing the process that converts inputs (in the forms of materials, labour and energy) into outputs (in
the form of goods and services).
Operations traditionally refers to the production of goods and services separately, although the distinction
between these two main types of operations is increasingly difficult to make as manufacturers tend to
merge product and service offerings. More generally, operations management aims to increase the content
of value-added activities in any given process. Fundamentally, these value-adding creative activities
should be aligned with market opportunity for optimal enterprise performance.
Supply chain management (SCM) is the discipline that manages supplies and processes through all
of the stages of a project, product or business deliverable. Business material has a journey as it moves
from one state to the next until it’s ready to be delivered to the customer or stakeholder. Then there’s the
logistics of taking the finished product from one place to another. Getting through these various stages
Every aspect of business is managed to make the most of the resources involved and be as productive as
possible. People are managed and supplies require management as well. Whether those supplies are goods
or services, they must be accounted for and carried through from start to finish with deliberate control.
Supply chain management is used to describe a number of different approaches that are used to integrate
the flow of materials, finances and information efficiently. These items are usually outsourced from any
number of places. These sources include suppliers, manufacturers, wholesalers, distributors and retailers.
Items can pass through several hands until they reach the customer.
SCM then is tasked with coordinating and integrating this back and forth, within and outside the
organization. Its objective is improving service for the customer but not at the expense of the
organization, which is seeking at the same time to reduce its supply chain costs.
There are many stops along this route, but first comes the design and plan, which when executed must be
monitored as would any other project to measure its progress and control any issues that arise before they
Diverse Discipline
Like anything else, SCM didn’t show up fully formed but was influenced by other disciplines. It is made
The field is anything but static, with developments continuing to this day, including taking into
consideration issues of sustainability, as well as other ethical concerns, and incorporating risk
management. As markets globalize, supply chain management grows in complexity and reach.
As expected, having to control and integrate all these very different parts is what makes supply chain
management a challenge. However difficult that goal might be to achieve, the rewards in customer
satisfaction and bottom-line savings are more than enough motivation to seek a cohesive whole, making
the journey from raw materials to final goods efficient for the organization and satisfying for the
customer.
The mission of any SCM methodology is to coordinate all the varied parts into a cohesive whole, from
supplying raw materials to delivering final goods or services. The goal is to reduce costs in achieving this
objective. The issue is that there are often many conflicts among supply chain partners. For example, a
sales department might want more inventory on hand, but warehouse space is limited and can’t fulfill this
need.
Origins of Supply Chain Management
While the idea of supply chain management is certainly as old as commerce itself, the term only dates to
1982, when British logistician and consultant Keith Oliver used in in when interviewed by the Financial
Times. Supply chain management was simpler at first, only dealing with the flow and transformation of
goods and raw materials to end-users, including associated flows of information. In time it came to
include integration of supply chain activities through improved relationships to give one a competitive
edge.
By the late 1990s, SCM was starting to show up in the titles of operational managers. It has broken from
the shadows to stand as its own discipline. With this, the definition of supply chain management
expanded to include management of upstream and downstream value-added flows of materials, final
goods and related information among everyone from suppliers to the final customer.
It also spoke to systemic, strategic coordination of traditional business functions and tactics within the
company and over its supply chain. It was at this time that SCM began to focus more directly on customer
development and their idea of what was of value. It was important to be responsive to these concerns,
which lead to the integration of key business processes in the supply chain.
To get the most out of SCM requires looking at the big picture in terms of an organization’s management.
No longer is managing an individual company function enough. The integration of all activities involved
in the supply chain is necessary: that means integration between different departments, such as purchasing
and marketing.
Supply chain management also needs integration and collaboration between buyers and suppliers, joint
product development, common systems and shared information. While ideally there should be a
continuous back and forth of information, it is more realistic to think of this flow as a process. That
company’s current and potential customers in order to understand what they want and expect.
focuses on the interactions between the customer and the company instead of a more strategic
management process. It helps facilitate a mutually satisfying goal for both customer and the
Demand-Management Style: A methodology to forecast, plan for and manage the demand for
products and services. This can address both macro-levels, as in global economics, but also micro-
delivery of that product or service to the customer. It is the way a company responds to customer
orders.
based on historic data surrounding how it has been done and what was needed historically. But that
process needs flexibility as quantities change. Therefore, one must manage all activities related to
Supplier-Relationship Management: Supplies likely are coming from a third party, and those
interactions must be strategically planned for. This increases the value and reduces risk.
suppliers are integrated into product vision and the product development process. Shortening the
product life cycle keeps the company competitive. This process includes coordinating with customer
relationship management to know customer needs, selecting materials and suppliers with
procurement and developing a production technology in the flow of manufacturing to integrate the
best supply chain flow for the product and market. When successful, this has a positive impact on
Returns Management: There will always be returns and the better they’re managed, the more
productive and competitive the SCM process. Management of this aspect of the SCM means fast
and easy returns management, automation and deciding how to process returned materials. Make
sure information is visible to capture early in the process. Then control the flow of product,
including receipts and reconciliation, noting if there are any quality issues.
Why is Supply Chain Management Important?
Supply chain management is a hefty task with hefty rewards. We outline a few ways that well-executed
The simple answer to why SCM is important to any business is that it helps them remain competitive.
Markets change, and as the marketplace becomes increasingly global, the need for better efficiency is
crucial. As management goals change, too, there is a move away from the past traditional relationships to
incorporate and organize all business processes throughout a value chain of multiple companies.
Advances in information technology and the increasing use of outsourcing has also added to the
expansion of the supply chain. This has created a need for a more collaborative network, so different
These changes in how businesses are managed have led to the development of supply chain
environments. Multinational companies, joint ventures, strategic alliances and other partnerships, as well
as technological advancements, have contributed to more cooperation among those in the supply chain
network. As supply chains become more holistic and cooperative, companies must adapt.
Proactive Strategy
But supply chain management is not merely reactive, it also helps to stimulate innovation and
productivity by assisting companies with organizational learning. The more extended a company is in
terms of its supply chain, the more adaptive it has to be. That leads to creative thinking, which results in
Satisfies Customers
Customer service also benefits. Customers demand quality and they expect products to be available where
and when they want them or delivered when on time. Supply chain management will also help with sale
But it’s not just the customer who benefits. As noted, SCM is instrumental in cutting operation costs.
When smartly applied it can decrease purchasing, production and total supply change costs. This
improves a company’s financial position by adding to profit leverage, reducing fixed assets and
Supply chain management is just one more screw that can be tightened on the ship of business to help it
sail better through the turbulent waters of industry. But it’s a complicated process, one that benefits from
having robust project management tools to plan, monitor and report on the many aspects of the supply
chain that need control. ProjectManager.com is a cloud-based software that has the tools to make you