Prof. Misty Blessley, at Temple University, shares her insights with our readers monthly.
“From inventory management to materials requirement planning (MRP), for many years manufacturing leaders have viewed operations as a cost center — one that takes money off the bottom line rather than adding revenue to the top line”, writes Forbes (Jan. 22, 2024).This, in turn, has created a tendency to treat OM as a set of functional areas that must be continually optimized to reduce costs. But industry is at an inflection point. In an era of heightened customer expectations, diversified supply networks, rapidly advancing technologies, and enhanced environmental, social and governance (ESG) scrutiny, firms are challenged to consign this long-standing, cost-driven view to the past.
With the supply chain being where many of these challenges are being addressed, it is the focal point for viewing operations as a firm’s competitive advantage. By taking a more strategic approach, companies can also think outside the box of traditional OM and turn their supply chain into the center of enhanced operations performance.
Here are three questions firms must answer to achieve an advantage through their operations.
1. What does making the supply chain a center of enhanced performance look like? It means leaving behind the use of historical data in favor of taking on new technologies to gather consumer insights for driving customer satisfaction.
2. What happens when firms get strategic operations right? When consumer insights and OM are in harmony, firms do a better job at meeting customer expectations, to the benefit of increased customer loyalty (i.e., sales). The employee experience is also improved.
3. How can strategic operations be achieved? This can be done by integrating the supply chain across multiple enterprise operations in response to demand signals captured across the value chain. For example, rather than just trying to balance demand and supply to avoid a stock-out or excess inventory, companies work to balance operations to deliver the right product to the right customer at exactly the right time.
There is always pressure to control costs, but leveraging technology is the key to using the supply chain to build competitive advantage. This has the potential to positively affect the firm’s top as well as bottom lines.
Classroom Discussion Questions:
1. Chapter 11 of your text states: “The objective of supply chain management is to structure the supply chain to maximize its competitive advantage and benefits to the ultimate consumer.” How is viewing the supply chain as a revenue driver, as opposed to a cost center, in line with this objective?
2. What is the role of business analytics (Module G) in setting the stage for strategic operations in 2024?