Operations and Supply Management
In the recent past, businesses have been facing unprecedented competition from other firms in the same industry. As such, to adapt to this competitive pressure that is unprecedented, firms need to be innovative and quick in coming up with solutions. In this dynamic business environment, there are two elements of a company that may be used to manage this ever-changing environment. These components of a company include operations management and supply management. In informal settings, these two components are usually used interchangeably. The reason for this is that persons who have the responsibility of managing the supply and operations of a firm, do have common attributes. However, this is not true because their roles and purposes are unique. Also, to the managers having similar attributes, the confusion of these components is a result of their interdependency, and at times, supply management is usually considered as part of operational management. The consideration of supply management as part of operation management is so because supply is part of the production process.
This paper aims at providing comprehensive information about the difference between operation management and supply management, and their degree of influence within an organization. This will be achieved by first clearly defining the terms supply management and operational management. This is then followed by a discussion of their functions and importance in a firm. Thirdly, the similarity and differences of these components will be analyzed. This is done in a bid to establish the relationship between operational management and supply chain management.
Operation management is an essential element of a business that ensures efficiency in all undertakings within an organization. Therefore, it entails the conversion of inputs to outputs in the most efficient way so as to maximize the profit while reducing the cost of production. Operation management as a business function has unique characteristics. One of the most important features is that it is a fundamental purpose of an enterprise. The second characteristic is that it exists in all types of businesses. Additionally, since it is a key function, it interacts with other functions such as finance and marketing in a bid to realize an organization’s goals.
On the other hand, supply management refers to the process of identifying the needs of an organization and the acquisition and management of the products or resources that will be used to satisfy the needs of a firm. The goods or resources may be tangible products or intangible ones such as services and resources. Since supply management is a subset of operation management, its characteristics are relatively similar to that of operation management.
From the above definitions of both operation management and supply management, it is evident that the two functions of an organization differ from each other, but at the same time, they are related. To further understand the difference between the two business functions, the term operation as per business refers to the coordination of business activities that are aimed at putting together materials and services to come up with an end product that is appreciated and valued by the customers. As such, this is a value addition process; for instance, a bag of mangoes may undergo the value addition process to end up with bottled mango juice. In this case, the first status of the bag of mango is less compared to the bottled mango juice. In this regard, the operations department in any business gathers inputs and comes up with a suitable production methodology that will see the value addition process taking place efficiently. Therefore, the function of operation management in a business is to ensure that all process that leads to the production of products run smoothly.
Apart from the changing inputs to outputs using the most efficient production method, operation management also has several strategic functions of operations management. Among them costs leadership and goods or service differentiation. In this context, the phrase strategic function means the roles of operation management that are key on the organization’s goals. For this to be realized, the entire operation department needs to be aware of the objectives of an organization for them to allocate the necessary resources to a particular process that cumulatively will lead to achieving the organization’s goals.
Cost leadership as a strategic function of operation management refers to the tactics of producing goods and services at a lower cost and yet ensuring that the customers still values the product. This is essential to a business’s competitive advantage; for instance, if an organization through operation management decreases its cost of producing and distributing its goods and services it will have an advantage over its competitors. The important part of this critical function is that, despite the reduction in the cost of production, operation management needs to ensure that customers still value the good or service. Failure to observe this, the strategic function will be unsuccessful as it would lead to losses.
Good or service differentiation as a strategic function refers to the way an organization may make its products to look different from other products that are similar. This feature is strategic as businesses use it to improve on their sales and at times to ensure that they sell products at a relatively high price. Some of the ways that operation management differentiate the organization’s goods and services are by using obvious transformational tactics on the price, quality and efficiency. However, some organizations employ innovative ways of differentiation such as those relating to technology.
Operational management also has a coordination function. The department charged with the responsibility of operation management is the one that is concerned with the gathering of materials and resources and coming up with the best way of producing a good or service. To achieve this, the management has to inform all stakeholders of an organization of the efficient method of production. This requires a coordination of the different departments that makes up an organization. For instance, if the operation management establishes that there is a need for staffing it will liaise with the human resource department and if an issue about product design arises, the department will consult the marketing department.
Supply management is a vital component of a business as it is closely linked to operational efficiency. This function of a business is crucial because the satisfaction of customers and the success of a business depend on it. This is because supply management as a core function of an organization relates to all facets of a business’s operations. This includes strategizing, purchasing, transportation, production and processing among other business operations. Therefore, supply management does not only apply to multinational companies, but also other small and medium enterprises around the world. The main objective of this business function is to create a net value. The second aim of the function is to establish a competitive infrastructure that will ensure the business flourishes compared to its competitors. The third objective is to synchronize the supply of goods and services so that the production process is continuous and customers’ demand in the market are met.
Like the operational management, supply management is essential to an organization as it has several key functions. One of the functions of supply management is the definition of the relationships and boundaries of a business. The management defines what an organization is set up to produce in-house, as such; any process or activity that is not within may initiate an outsourcing decision. Also on boundaries, it refers to the influence of suppliers and buyers in an organization’s decision making and operations.
The second crucial role played by supply management is that which relates to the management of demand and supply. Demand management is the controlling demand for products so that it may correspond to the amount of products available for sale. The needs of customers are met fully when individual suppliers within the supply chain can provide their products. As such, supply management ensures that goods and service supply is synchronized along the links.
The third function of supply management is logistics. Logistics involve the handling of materials and products by transporting or storing them. For instance, after the procurement of a certain raw material to be used in the production process, it needs to be delivered to the production center in time and the right quantity. Therefore, supply management ensures that it transports and stores the right quantity of input materials so that the operational activities may run effectively and efficiently.
The fourth function of the supply management is conducting purchases. Purchases are goods and services needed by an organization so that it may operate smoothly without any mishaps. As such, supply management makes sure that a business has all that it needs for it to realize its goals. Apart from this operational function, purchasing may be viewed as a strategic function of supply management. This is because decisions relating to the definition and implementation of organizational boundaries may be based on this function. It links suppliers and business through purchasing of products and getting help from suppliers who have knowledge of the specifications of the purchased product.
Supply management also has a function of making sales. As such, it has the responsibility of ensuring that the customers know and buys the product that an organization produces. The sales may be direct, where the organization sells it to a client with no middlemen. On the other hand, an organization may decide to establish a network of distributors who deliver the products to the end user. Sales are part of the daily business activities and also it dictates the distributional design that an organization selects.
Another vital function of the supply management is the amalgamation of the manufacturing system. This means that supply management fosters the process of manufacturing. The process of manufacturing requires a specific amount of inputs at a given time depending on the current product’s demand. As such, with the knowledge of a product’s demand, a supply manager may know the required amount of raw material that a certain manufacturing process requires. This further improves the customer service, as customer’s demand will be met by offering them the right products and quantity.
The functions of the operations management and supply management give a distinct difference between the two elements of a business. Operations management is internally based. This means that it focuses on activities inside the enterprise. For example, an operations manager may work towards the improvement of the firm’s productivity and maintaining its quality standards. On the other hand, supply management is externally based. This means that its activities are usually those which link the business with the outside world. For example, purchase of raw material, distribution and delivery of the firm’s products.
In conclusion, with the difference in functions and environment of operation between operations and supply management, the former has more influence than the latter. This is because the operations management is the one who decides in the production process which therefore influences the type and amount of raw material needed. Therefore, the supply management is dictated by the operations management. Additionally, supply management is a subset of the operations management that makes the latter to be more influential in an organisation.