The Role Of Operations In Supply Chain Management
Operations management is a crucial part of SCM. It comprises controlling, planning, and coordinating all processes and resources needed to produce goods and services.
Operations management is only one aspect of supply chain management, however. SCM focuses on the entire supply chain, including dealing with both internal and external processes.
This article will discuss the role of operations in SCM, various operations and supply chain processes, and challenges faced in operations management.
Understanding Operations in Supply Chain Management
Operations in logistics refer to the day-to-day activities that take place in a supply chain. These activities include production, manufacturing and distribution processes.
This makes operations management a crucial function in overall supply chain management. If day-to-day operations stall or falter, a supply chain will no longer function effectively. Operations comprise a huge part of the supply chain – there would be no supply chain if products were not being produced.
Supply chain managers and operations managers perform different duties, but do interact with one another. There is definitely a link between the two departments.
For example, an operations manager will create a budget for the raw materials needed to meet customer demand. A supply chain manager will then place an order with the supplier, and receive the shipment when it arrives.
Supply Chain Operations Processes
Forecasting and demand planning
Forecasting and demand planning is an operations management process that involving predicting consumer demand for products so that they can be delivered to customers on time and in the right quantity.
This process is incredibly important to both SCM and operations management. It lays the foundation for other supply chain activities, like manufacturing, procurement of raw materials and financial planning.
Effective forecasting and demand planning can reduce costs and production lead times, as well as preventing warehouses from becoming under- or over-stocked.
Inventory management is quite a broad department in operations management. It is the function responsible for supervising the flow of goods all the way from manufacturing to the point of sale.
This includes managing raw materials, finished products and various components; ensuring they are properly stored and processed. Inventory control is also an important part of overall supply chain management; the more effectively a business manages its inventory, the more money it saves.
If a business has more stock than it needs, unnecessary funds will be tied up in inventory, limiting cash flow and resulting in a budget deficit. However, if a business doesn’t have enough stock, it won’t be able to meet demand, which can lead to poor customer satisfaction.
Production scheduling refers to coordinating and organizing a company’s production processes to meet customer demands, and optimize the way resources are used.
This typically involves assigning raw materials, equipment, staff, and production processes to different products. Production scheduling is designed to make the manufacturing process as cost-effective and efficient as possible.
This job role includes ensuring that finished products reach their destination on time.
Production scheduling has become easier since the introduction of production scheduling software. These tools can provide operations managers with updates when production is lagging, and create efficient production schedules using algorithms and optimization techniques.
Logistics and transportation
Logistics and transportation is the operation in supply chain management that relates to moving goods from one location to another. These supply chain operations processes are exceptionally important, as without them products cannot be delivered to customers.
There are many processes that take place within logistics and transportation in supply chains. These processes include:
- Transportation planning: This entails choosing the right method of transportation, the best routes for transportation, and providing customers with accurate delivery times.
- Consolidation: Before products can be sent off, they must be picked, packaged, and prepared for transportation.
- Shipment tracking: While goods are in transit, they must be tracked so operations managers can see if their estimated delivery times will be accurate.
Quality control and assurance
Quality assurance and control are both important processes in supply chains, ensuring that products meet the stipulated quality standards. However, the two terms – assurance and control – differ slightly.
Quality control refers to monitoring, testing, and inspecting products at each stage of production to find defects. If any defects are found, corrective actions are taken before products are shipped off to customers.
On the other hand, quality assurance focuses on preventing defects and quality issues from occurring, rather than fixing them after the fact. Quality assurance requires businesses to develop processes to ensure that products are designed and manufactured to meet the quality standards set by the customer.
It goes without saying why these processes are important – superior quality products boost customer satisfaction, while defective products lead to poor customer satisfaction.
Challenges in Operations Management
There are many factors that affect operations management in the supply chain. These factors include:
- Customer demand has a major impact on operations management. High demand means that more raw materials and staff will be needed to complete projects.
- Competition can cause businesses to try and make their processes more efficient to gain a competitive advantage.
- Regulations and laws can affect how a supply chain operates. Certain countries may impose additional taxes, for example, which can have an effect on supplier selection.
Now that we have discussed the factors that can affect operations management, we can delve into the common challenges facing these professionals. We will also cover supply chain strategies that can be used to overcome these challenges.
- Delays in logistics: Logistical delays can be caused by many factors. These include traffic, poor weather conditions, and a lack of shipment visibility.These challenges can’t all be overcome, but they can be managed with better route planning and shipment tracking. Both of these processes can be improved with automation.
- Equipment issues: All facilities in supply chains rely on equipment to perform processes. When this equipment breaks down, employees cannot do their jobs, slowing the supply chain.This challenge can easily be avoided by maintaining equipment regularly.
- Poor inventory management: If warehouses and inventory are not managed properly, it can also slow the supply chain down. Poor management makes it difficult to find products that need to be shipped, and can provide a business with inaccurate data.Thankfully, inventory management systems can help to automate the process and reduce errors.
Operational Efficiency in Supply Chain Management
Operational efficiency is essential for an efficient supply chain. Efficient operations management can lead to:
- Reduced costs
- Faster delivery times
- Better product quality
- Better decision making
All of these benefits should leave most customers satisfied and improve a business’s turnover and reputation.
Operational efficiency is measured through key metrics, such as:
- Cycle time: The time it takes for a process in a supply chain to be completed.
- Inventory supply and turnover: This metric measures the amount of inventory that is in a business, and how often it is sold.
- On-time shipping rate: How often deliveries arrive on time when they are shipped to customers.
- Order accuracy: How often orders are fulfilled correctly.
For a business to increase its operational efficiency, it must start by identifying areas where it can improve in the supply chain.
Once these areas have been pinpointed, a business must assess which processes can be automated and how. Automation can reduce human error and time spent on menial tasks.
At this point a business should analyze areas where they can streamline processes. This can be done by updating outdated and overly complex supply chain activities, and, wherever possible, reducing the number of employees assigned to each process.
Strategies for Effective Operations Management in Supply Chain
For a business to develop a strong operations management strategy, it must start by defining its business objectives and determining customer demand for each project.
Once this has been determined, the current supply chain must be evaluated to see if it can cope with the demand. The next step is to develop an action plan outlining the necessary steps to improve operations. This strategy can then be put into place, but must be adjusted for individual projects and customers.
Finally, collaborating well with customers and suppliers can help to further optimize and create a resilient supply chain.
All of the above can be achieved by implementing the lean agile principles. These principles can help a business reduce waste, and maximize efficiency and value.
Operations management is essential in every industry; it covers everything from forecasting and demand planning to logistics and transportation – some of the most important components in logistics. An organization’s supply chain will not be able to function properly without effective operations management.
If this job role appeals to you, start by researching SCM qualifications and exploring what operations management entails.
What is operations management in supply chain?
Operations management refers to the daily activities that take place in a supply chain. It focuses on all of an organization’s internal processes that relate to the supply chain.
What are the key operations in supply chain management?
The key operations in supply chain management include:
- Forecasting and demand planning
- Inventory management
- Production scheduling
- Logistics and transportation
- Quality control and assurance