The Role of Supply Chain and Operations
Supply chains, for the most part, are focused on delivering products and services to customers at the right price, in the right quantities, to the right places, and at the right time. In doing so, they keep four overarching areas in mind to create value for our organizations:
- Increasing quality
- Increasing service
- Lowering cost
- Increasing throughput (reducing time)
This is a daunting task considering supply chains are long, complicated, and complex; in addition, consumer preferences change frequently leading to shorter product life cycles along with risk and working capital challenges. In a supply chain, there is no shortage of opportunities for things to go wrong, but these are also opportunities for companies to gain a competitive advantage. Execute a supply chain well, and you will leave your competitors behind!
The SCOR model (Figure 1.1), a management tool, attempts to bring structure to many of the areas under the purview of supply chain managers. The SCOR model has been developed to describe the business activities associated with the phases of satisfying customers’ demand. It is a process reference model that includes everything from the supplier’s supplier to the customer’s customer. Each area of the SCOR model, Plan–Source–Make–Deliver–Return, brings opportunity to add value for your organization. Its purpose is to structure the supply chain in a way that allows for identifying and improving supply chain processes. Process improvements are intended to create value for the firm through gaining a competitive advantage in the areas of reliability, responsiveness, agility, cost, and asset management.
Figure 1.1 SCOR model. (Adapted from Supply Chain Council, Inc.)
In addition to the SCOR model that allows us to identify where value is created throughout the supply chain, Porter’s value chain (Figure 1.2) provides an overview of where value is created in an organization. Supply chain and operations are responsible for much of the value creation for an organization. Interestingly, a large percentage of the support value activities and all the primary value activities are comprised supply chain and operations functions.
Figure 1.2 Value chain. (Adapted from Michael Porter’s Value Chain. Competitive Advantage: Creating and Sustaining Superior Performance, NY: Free Press; 1985.)