Supply chain management explained

Supply chain management is a discipline that is closely related to operations management, and the two are also interrelated. Supply chain management is often integrated into operations management in many firms. An establishment’s operation managers collaborate with various departments to achieve business goals such as ensuring that the company’s products are produced in accordance with specifications, that appropriate packaging is done, and that the products are successfully marketed and sold to the appropriate retailers. This paper examines the importance of supply chain management in operations management.

Supply chain management enables firms to gain a competitive advantage without having to cut their product costs. Most businesses lower the charges of their commodities as a strategy to out-compete their rivals within an industry (Christopher, 2016). However, at times this approach is never viable because the costs involved in doing business determine how low the prices can be reduced without making a loss. Nonetheless, supply chain management offers a means by which companies can gain competitive advantages which are not linked to a reduction in the prices of goods. For example, an establishment can create an efficient supply chain which helps in the fast delivery of orders to the clients.

After a product is introduced in the marked and advertising is done, the sales counters and the entire market within a country will demand to have the good where consumers can purchase and take delivery. Unavailability of the commodity for even a short period when it is needed can cause a drop in the interest of the customers (Christopher, 2016). When all other factors are kept constant consumers will prefer businesses that meet their needs quickly. Therefore, establishments that meet the requirements of their clients faster develop a competitive advantage over their rivals.

Supply chain management is also vital to operations management as it helps in reduction of costs. Effective supply chain management leads to eradication of redundant steps, for instance, it saves the cost of salary by making sure that employees do not spend much time on unwanted procedures (Christopher, 2016). Supply chain management is essential in providing better inventory management which saves time by removing unnecessary, time-consuming processes and reduce costs by lowering levels of inventory to optimal quantities. It also increases the power of an organization in negotiations with business partners like retailers and suppliers who also benefits by doing business quickly. For instance, a retailer who carries the products of a firm might be more willing to provide favorable terms if the corporation regularly delivers goods on schedule.

In most big companies some departments are committed to the creation of an optimal supply chain management hence giving them an enormous cost advantage when compared to the smaller establishments (Christopher, 2016). For instance, a large retail business can have distribution hubs located all over a region, enabling it to process and finish orders by customers much more efficiently than small retailers. Even though it is hard for less equipped establishments to compete large companies, enhancing supply chain management will still provide benefits if it can reduce the times used in processing and delivery of products and also lower costs. Companies such as Wal-Mart who have adequate supply chain management have benefited from cycle time and cost reductions.

Another reason why supply chain management is crucial to operations management is that it improves customers services within an organization. An adequate supply chain management will enable a company to do three things that will enhance its customer services. The efficiencies are faster and accurate delivery of goods to the consumers, tracking shipments to ensure safe delivery, and retain an optimal level of inventory to ensure that whatever the customers require is always available in the stock (Wisner, Tan, & Leong, 2015). The three strengths will allow an organization to win the trust of the clients as it will be able to continuously meet their expectations and fulfill its promise to the customers making them always to come back and even refer their friend to the business.

Apart from improving customer services, supply chain management also creates customer satisfaction. A proper supply chain management determines price and delivery within an organization. It allows business to beat competitors on price and enhance profitability. Providing client with exactly what they require and at a lower price is crucial in making them satisfied, and this is what efficient supply chain management does (Wisner, Tan, & Leong, 2015). By selecting the correct systems, partners, and approaches, an establishment provides its clients with transparency, better service, and visibility that they usually long for. It gives a company absolute control over its product movement from conception all the way to delivery, employing systems to eliminate errors and improve inventory effectiveness. Optimization of supply chain management leads to better customer experience and consumer satisfaction making them more willing to continue buying from the business.

As a part of operations management, supply chain management also helps in maintaining a better trust between partners (Wisner, Tan, & Leong, 2015). Trust is one of the highly essential factors when it comes to commitment and collaboration between a business and its partners. Efficient supply chain management assists in the development of this trust leading to a reduction in transactional costs and improvement of performance.

Supply chain management also improves quality, therefore, making it vital to operations management. It impacts product quality and the entire profitability of an organization directly. Notably, quality control is an essential aspect of the supply chain for a business to keep being competitive at the market and also to minimize its operational costs. An absence of quality control leads to accumulation of waste beyond tolerable quantities (Wisner, Tan, & Leong, 2015). For example, flawed raw materials can make the entire line of production ineffective and increase deficiency levels in the completed goods inventory. Additionally, low-grade materials may need extra reefing or machining which cause the addition of workload to the employees and the total cost of manufacturing. To prevent such incidences from occurring, material and the vendors that provide them are typically audited by members of the supply chain staff to ensure that they satisfy the organizational specifications. Through control of the production inputs quality, supply chain managers help in the protection of the integrity of the operations of their company.

Lastly, supply chain management improves process integration hence enabling producers to look into the processes of business across multiple suppliers (Mangan, 2016). When appropriately carried out, supply chain integration provides benefits to everybody even though those who benefit the most are the buyers. Because supply chain integration mainly focuses on the processes that are associated with cost reduction throughout the supply chain, a wholly integrated supply chain allows end-users to manage inventory, manufacturing, and transaction cost more cost-effectively and efficiently (Mangan, 2016). Integration of supply chain leads to all these advantages since each part of the supply chain including procurement, logistics, storage, post shipment support, installation, and information systems are streamlined and evaluated to ensure that unnecessary costs and efforts are eliminated, and service levels are improved.

Supply chain management has various managerial implications; optimal supply chain management enables managers to work closely with all the stakeholders throughout the process from raw material acquisition to product delivery (Mangan, 2016). This collaboration is mainly aimed at enhancing business processes and cost saving. It assists organizational management to improve their purchase and also strengthen inventory performance according to the rules of procurement based on the levels of stock, sales orders, logistics, and forecast production orders among others (Mangan, 2016). Furthermore, a proper supply chain management allows managers to select distinct replenishment approach for every good depending on delivery and manufacturing strategies. Supply chain management leads to managerial success through global sourcing and sales, vendor penetration, logistics skills, and accounting silos.

Overall, supply chain management is vital to operations management for many reasons including helping an organization to develop competitive advantage without having to lower the prices of its products. Additionally, it assists in cost reduction through better inventory management that removes unnecessary, time-consuming procedure that makes employees waste so much time. Moreover, supply chain management helps in improvement of customer services and satisfaction by carrying out faster and accurate delivery to consumers and ensuring that there is enough stock for the clients to get what they want at the correct time. It also improves quality through auditing to ensure that flawed raw materials that may lead to low-quality finished products are eliminated. Furthermore, supply chain management enhances process integration within a business.

References

Christopher, M. (2016). Logistics & supply chain management. Harlow: FT Publishing International.

Mangan, J. (2016). Global logistics and supply chain management. New York: John Wiley & Sons.

Wisner, J. D., Tan, K. C., & Leong, G. K. (2015). Principles of supply chain management: A balanced approach. Boston: Cengage Learning.