One of the important aspects of operations management is managing the supply chain. Typically, this dynamic system handles a complex network of supply and distribution activities and delivers them to the designated customers. Depending upon service or production needs, the complexity of the chain varies from one organization to another.
In traditional industries, various activities that comprised the supply chain like marketing, distribution, purchasing, and manufacturing operated autonomously. This would often lead to conflict up and down the supply chain. The conflict occurred between the manufacturer's production goals and customers' requirements.
Therefore, evolution in modern thought led to the integration of these functions that is known as supply chain management (SCM). An important issue that frequently crops up is handling the supply management system. Supply chain management depends upon the input variables such as raw material right from the point of origin, depending upon customer requirements, to manage a complex set of output variables such as finished goods and distribution networks until the point of consumption. Many management professionals often compare a well-performing supply management team to a well-trained relay team.
Problems occur when the balance between the input and output supplies is disturbed. In many cases, the equation between incoming load, manufactured material, and products ready for delivery gets so complex that the SCM system gets overloaded.
For smaller firms, materials requirement planning (MRP) and enterprise resource planning (ERP) are two tools that enable the supply of material and goods for the satisfaction of the consumer. However, larger firms need a more sophisticated management planning system that takes the broad name of SCM. Because of innovations in management techniques, the equations governing operations supplies and demands are presently well-established.
Larger manufacturing operations find that many of the assumptions made by simpler planning techniques are illogical today. Assumptions such as existence of queues in the supply chain, fixed lead times, and infinite capacities cause immense scheduling and conformity problems. Rather than assuming outcomes, the focus has been turned to streamlining operations.
The success of supply chain management depends upon the fast and accurate flow of information. A variety of 'signals' control the start of the flow of material. Timely sequencing and conveyance of information ensures that the supply chain is appropriately sequenced. Once an effective supply chain process is conceived, several variants of the process can be developed so that all possibilities are covered.
SCM processes should be flexible so that variations in customer demands can be taken care of within a short time. Furthermore, a short demand-driven supply cycle removes the uncertain variables in the supply management process.
Supply chain management is a tightly integrated management system that works well in coordination with other crucial subsystems like procurement, logistics, and inventory control. Proper management of the equation that governs the supply chain process can be coordinated to obtain desired production and distribution goals.