Supply Chain Management Role in Operations Management
Imagine a car running—you would obviously know that there a number of components that keep the car running, and that each component is crucial. The engine, the wheels, and the machinery inside all drive the car; but, would the car run without fuel?
Similarly, imagine an organization with world class machinery and world-class employees who can produce goods; but what would happen if the supply of raw materials was not so great? The production would then be a start and stop story.
Supply management is the act of managing the supplies to an organization that helps critical operations run smoothly.
Supply management, in the context of operations management, is a broad term. Simply put, an enterprise needs raw materials and services to keep its operations running, and supply management would enable the enterprise to procure quality goods and services at a reasonable cost.
Why is supply management important?
Production of quality goods: Sound supply management will enable an enterprise to procure quality raw materials, and needless to say, the raw materials will result in the production of quality goods and services. Obviously, sound supply management plays an important role in revenue generation of an enterprise.
Meeting client commitments: Client commitments can come mainly in two forms: quality and on-time delivery of promised goods and services. Sound supply management will help an enterprise meet both commitments. For example, in order to meet client commitments that are time bound, the timely procurement of raw materials is essential.
What are supply management principles?
Relationships with suppliers: Strategic relationships with suppliers are a key action that every enterprise needs to perform. An enterprise first needs to identify the areas where the supplies of goods and services are required. Supplies can be in the form of goods, as well as human resources.
The next step would be to identify suppliers who have a proven record in supplying the required goods and services on time. The last step would be to enter into an agreement or understanding so that timely delivery of quality resources is achieved.
Internal management of supplies: An enterprise needs to specifically project the demand for goods and services. For example, all goods may not have the same kind of demand throughout the year, and it is essential to identify the phases when the demand picks up.
The supplier must know the times when the goods must be supplied abundantly. Also, it is critical to manage supplies in a manner so that the supplied goods and services are not wasted. Thus, a supply management system must be complemented by an excellent inventory management system.
Supply management obviously is no longer confined to a particular role. In the context of a globalized economy and heightened competition, supply management is being merged with inventory management and risk management.
Companies have been trying to bring all these activities under the umbrella of operations management. In order to thrive and thrive in a competitive market, a company must be able to successfully create a balance between supply, inventory and risk management operations.