Challenges in Operations and Supply Chain Management

Tori Katz
April 1, 2022

Managing operations and supply chain is a crucial part of any company's success, especially for those that are hardware-centric and rely on a consistent supply of small hardware. The global supply chain has experienced major disruptions over the past couple of years, demonstrating the importance of careful planning and supply chain management.

The logistics of sourcing raw materials, manufacturing, distribution, and final sale are all part of the supply chain management process, which requires proper planning, procurement, business operations, and fulfillment. However, supply chain management is subject to many challenges, such as ensuring customer satisfaction, managing supplier relationships, making sustainable choices, effective data gathering and management, and minimizing risks.

With an effective supply chain management system, a company can reduce costs, including purchasing costs, manage risk, ensure customer satisfaction, and maintain profitability. By using supply chain management software, like ControlHub, companies can automate formerly manual tasks and manage them within the same dashboard, saving time and increasing efficiency.

What is supply chain management, anyway?

In a nutshell, supply chain management is the way in which goods and services move between companies and their customers, from the most basic supply point of origin all the way to end users. In other words, it’s the logistics of sourcing raw materials and other parts, manufacturing, distribution, and final sale. 

This process requires proper planning, such as procurement, business operations, and fulfillment. It can flow between a few sites that are close together or span several continents.  For hardware-heavy startups, implementing a supply chain management system is critical to ensure that corporate planning isn’t thwarted by a supply shortage.

Supply chain management isn’t always easy: here’s what you need to consider.

However, operations and supply chain management is subject to many challenges. As they say, the more moving parts you have, the easier it is for something to go wrong. To minimize this problem, many companies employ a supply chain manager. This professional ensures adequate inventory management, including procurement and overall business logistics. Below are some of the challenges that all supply chain management professionals need to address.

1. Ensuring customer satisfaction through supply management

Ultimately, a supply chain manager must think of the company as a customer: if a supply is out of stock, customers get annoyed, just as manufacturing would in a company. Likewise, having too much stock can hurt logistics and profitability. For this reason, the effective use of information systems should ensure that procurement knows when to order something from a supplier, and how long the supply will take to arrive. Overall, careful operations management helps ensure that your company warehouse has what it needs at the right time.

2. Managing supplier relationships effectively

Speaking of suppliers, these entities are also companies with logistics and supply chain management concerns. Proper planning requires careful inventory management, which in turn means that companies need to know the capabilities of each company they work with. For instance, some companies need long lead times to produce or ship something. 

Part of operations and supply chain management is building a relationship with the right people in those supplier companies. Not only will they tell you how corporate operations management allows for things like rush jobs, but when their information systems indicate logistics delays, they’ll communicate. This lets procurement make adjustments as necessary.

3. Making supply choices that are as high-quality and sustainable as possible

If we’re honest about the current business climate, it’s clear that sustainability is more than just a buzzword within supply chain management and other disciplines. Some countries and other jurisdictions have rules about carbon footprints, operations management mandates that require special attention, and other planning concerns.

For this reason, companies want the most sustainable supplies possible. This is easier with effective supply chain management and current data within information systems that can analyze it. Some logistics factors, such as location of a supplier and their manufacturing practices can help differentiate sustainable options from their competitors.

Supply chain planning can also help ensure that a company buys the best quality products for their money. Like so many things in business, value is a critical consideration. You don’t want to jeopardize profitability, but choosing a poor quality option can hurt your reputation through final products that break too soon. Worse, constant breakdowns hurt your operations management through factory repairs. Luckily, effective operations and supply chain management can help avoid this by ensuring top quality products.

4. The effective gathering and management of supply data

One of the biggest operations and supply chain management challenges is knowing when to order something from a supplier. Fortunately, effective supply chain management software can help. Combined with other parts of a company’s information systems, the supply chain manager can track how much of something their company uses during a given time period, such as 100 screws an hour. In addition, computer programs keep track of how long it takes to get something from a supplier and, accordingly, when to order more of something. 

Similarly, if a supply runs low before it should, the operations management personnel will know to investigate. It could be that there’s an inefficiency, a few defective units, or employee misconduct. Either way, with the right data it’s easy to pinpoint the problem and correct it as appropriate. This can include better planning, improved inventory management, or other measures.

5. Minimizing risks through effective supply chain management 

Back in 2020 there was a big scandal about major company supply chains and manufacturing practices because of evidence some products were made with forced labor in China. Not only did this show gaps in supply chain management controls, but it also led to investigations and boycotts. 

If nothing else, this problem illustrates the importance of operations and supply chain management in terms of corporate responsibility, especially for technology companies. Chances are that your company doesn’t want to have anything to do with suppliers that engage in shady practices or can trigger regulatory challenges. Fortunately, adequate operations management can often eliminate this problem. 

However, this isn’t the only challenge that companies must consider. Rather, effective supply chain management requires that companies consider unforeseen circumstances. Even the best suppliers have trouble, such as broken equipment, to consider. In addition, there can be shipping and other logistics factors to consider. Fortunately, supply chain management, done right, includes contingency plans to keep each company working.

Did you know ?

Operations and supply chain management is complicated and can evolve quickly

There’s no question that supply chain problems can develop at any stage of your procurement and manufacturing continuum. With the global supply chain experiencing a lot of turbulence, it’s important to have contingency plans and to avoid the last-minute replenishment trap. For now, at least, even basic logistics can be tenuous. Supplies get caught on container ships, grounded in countries that have sudden difficulties exporting anything, or stuck in a manufacturing backlog.

Fortunately, there’s hope. With an effective supply chain management system your company can reduce cost and stress across the C-suite. For instance, engineering and procurement teams know approximately when a shipment should arrive and can plan accordingly. And, if there’s a supply chain snag, those same departments can pivot to obtain alternate supplies as quickly as possible. 

Similarly, if accounting notices that a particular supplier has raised its rates beyond market, they can talk to the procurement department about finding a sustainable alternative or using their personal relationships to negotiate better rates. With inflation at a decades-long high, this is a significant concern to ensure ongoing profitability. 

Finally, supply chain management software helps with costing, risk management, and inventory control. For supply chain managers and finance professionals alike, software like ControlHub helps to ensure that the business runs efficiently and profitably. Best of all, it saves a ton of time for each team because it automates formerly manual tasks and manages them within the same dashboard.

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Managing operations and supply chain is crucial for the success of any business, especially for hardware-centric, procurement-heavy startups that rely on a consistent supply of small hardware.

In this post, we have explored the importance of supply chain management, its challenges, and how it can impact a company's profitability and customer satisfaction. From ensuring customer satisfaction through supply management to managing supplier relationships effectively, making sustainable choices, effective data gathering and management, and minimizing risks, we have discussed the critical aspects of supply chain management.

We have also emphasized the role of technology, such as procurement automation software like ControlHub, in streamlining supply chain management and increasing efficiency. By implementing an effective supply chain management system, hardware-centric startups can reduce costs, manage risk, and maintain profitability. Complementing this with the use of other automation solutions like purchasing software or purchasing approval software will take you to the next level.

Tori Katz
Content specialist
Tori has a deep expertise in procurement and digital transformation technologies within the hardware industry. Author of extensive guides on strategic procurement practices and technology implementations. Focuses on improving operational efficiency and strategic growth through content.

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