When it comes to operations management vs. supply chain management, or even ops supply chain, you may find these terms are often used interchangeably. While closely related, they have some major differences. Let’s take a deeper dive into the inner workings of operations management vs. supply chain management, uncover what makes them unique, the degree you need to work in each discipline, and the right path for you.
What Is Operations Management?
Kicking us off, exactly what is operations management? Adam Hayes of Investopedia (2023) explains the key component of operations management is its primary focus on achieving the highest level of efficiency for the company to reduce costs (and, therefore, increase revenue). Writes Hayes, “Operations management (OM) is the administration of business practices to create the highest level of efficiency possible within an organization. It is concerned with converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization.” It’s important to note all of the operations within this purview are internal to the company.
What Is Supply Chain Management?
Supply chain management, according to Oracle, is the management of goods, materials, finances, product and service data – and everything in between – starting from procurement until all of these pieces reach their final home. Oracle succinctly summarizes it: “At the most fundamental level, supply chain management (SCM) is management of the flow of goods, data, and finances related to a product or service, from the procurement of raw materials to the delivery of the product at its final destination.”
Operations Management vs. Supply Chain Management: What Are the Differences?
On the surface, when comparing operations management vs. supply chain management, the two sound incredibly alike. Digging a bit further, however, you will spot the differences between the disciplines. Career site Indeed breaks down the two paths, highlighting the major difference setting them apart. While operations management largely deals with internal processes – such as tracking finances, data, materials, and more within a company – supply chain management oversees external processes that include, for example, any materials that are sent or received from outside the company. While the two disciplines work closely together to function, they are distinct operations.
Operations Management vs. Supply Chain Management: How Are They Similar?
Still, there are many similarities when it comes to operations management vs. supply chain management. They rely on each other to process services, materials, data, information, and the like for a given company, and they must pass that knowledge back and forth to one another through efficient communication. For instance, operations management and supply chain management, per Indeed, are similar in the following ways:
- Integrated processes: Operations management focuses on the internal processes and activities within an organization to produce goods and services efficiently. Supply chain management encompasses the entire process from raw material acquisition to product delivery to the end customer. It involves coordinating and integrating various processes across multiple organizations.
- Efficiency and optimization: Operations management aims to optimize internal processes, improve efficiency, and maximize productivity in the production of goods or delivery of services. Supply chain management aims to optimize the entire supply chain – including suppliers, manufacturers, and distributors – to ensure smooth flow and minimize costs.
- Customer focus: Operations management focuses on meeting customer demands by producing goods or delivering services that meet quality standards and are delivered on time. Supply chain management prioritizes customer satisfaction by ensuring products are available when and where customers need them. It involves managing the entire supply chain to meet customer demands efficiently.
- Coordination and collaboration: Operations management involves coordinating internal departments and resources to ensure seamless production or service delivery. Supply chain management requires collaboration with external partners, such as suppliers and distributors, to optimize the entire supply chain network.
- Risk management: Operations management addresses risks within the production process, such as equipment failures or quality issues. Supply chain management manages risks across the entire supply chain, including risks related to suppliers, transportation, and market demand fluctuations.
- Continuous improvement: Operations management emphasizes continuous improvement in processes, often using methodologies like Six Sigma or Lean to eliminate waste and enhance efficiency. Supply chain management strives for continuous improvement in the overall supply chain, aiming for greater visibility, responsiveness, and efficiency.
“I think it’s definitely allowed me to be flexible,” says UAGC alum Miraj Simpson, who earned a BA in Supply Chain Management. “I’m used to working in so many different environments. I am much more skilled at holding my composure when I’m in a situation I’m not familiar with. It’s also taught me to trust myself.”
Operations Management vs. Supply Chain Management: Strategic, Tactical, and Operational Issues
Both supply chain and operations management function at different levels to achieve their desired outcomes. Supply chain success depends on coordinated decision-making across three interconnected management levels:
- Strategic level: Setting direction
This top level establishes long-term vision and objectives by:
- Evaluating supply chain strengths and weaknesses
- Making fundamental structural decisions (vertical vs. horizontal integration)
- Developing sourcing strategies and technological adaptation plans
- Creating sustainability frameworks
The strategic level provides the foundational blueprint that guides all other supply chain activities and ensures adherence to core objectives.
- Tactical level: Building the bridge
The tactical level translates strategic vision into actionable plans by:
- Pursuing medium and short-term goals
- Implementing the criteria for supplier selection
- Coordinating processes across all supply chain segments
- Ensuring alignment between transportation, warehousing, inventory, distribution, and manufacturing operations
This middle tier acts as the critical connector between high-level strategy and daily execution.
- Operational level: Daily execution
The operational level brings plans to life through:
- Day-to-day management of supply chain activities
- Direct customer interaction and service delivery
- Handling of unexpected disruptions using strategic and tactical frameworks
- Management of forecasting, resources, staffing, and quality control
- Processing of materials, returns, and customer success activities
This level provides vital feedback to upper management, creating a data-driven cycle that informs future strategic and tactical decisions.
Each level depends on the others in this integrated framework, with information flowing up and down to create a responsive and effective supply chain operation. Operations management, on the other hand, may also rely on strategic operational, and tactical focus areas–but with a different approach. Let’s take a closer look.
Operations Management Across Three Management Levels
- Strategic level tools
Strategic tools focus on long-term planning and organizational positioning:
- PESTEL analysis to assess external environmental forces
- Competitive analysis to identify market opportunities and threats
- Internal resource and capability assessment
- Portfolio analysis using BCG or GE matrices
- Strategic planning for objective achievement including scheduling and task distribution
- Tactical level tools
Tactical tools bridge strategy with operations through medium-term planning:
- SMART objectives methodology for short/medium-term planning
- Budgeting and cost tracking systems
- Performance evaluation frameworks
- Process analysis for efficiency and quality improvements
- Quality assurance systems
- Human resources management including recruitment and training
- Operational level tools
Operational tools manage day-to-day execution:
- Process definition and improvement methods
- Needs identification systems
- Supply chain management
- Performance indicators and metrics
- Inventory management systems
- Individual performance monitoring and evaluation
Limitations and Challenges Across Management Levels
Each management level faces distinct challenges. They are:
- Strategic management limitations:
- Vulnerability to inaccurate forecasts and incomplete information
- Difficulty anticipating market fluctuations
- Risk of overlooking short-term opportunities while focusing on long-term vision
- Tactical management limitations:
- Tendency to prioritize short-term goals without considering long-term impacts
- Potential for misaligned decision-making without proper strategic guidance
- Risk of becoming overly operational and neglecting strategic objectives
- Operational management limitations:
- May lack broader context when focused on immediate execution
- Can become disconnected from strategic priorities
Effective operations management requires maintaining balance between short and long-term objectives while ensuring alignment across all three management levels, with clear communication channels to support integrated decision-making that serves overall business goals.
Supply Chain vs. Operations Management Metrics: How Do They Compare?
While supply chain metrics focus on the end-to-end flow of goods and materials, operations management can often take on a whole different set of KPIs, focusing instead on internal processes such as efficiency. According to FourKites, eight critical KPIs in supply chain management to track include:
- On-time delivery and accurate ETAs: Considered the most important supply chain KPI, especially in retail. OTIF (on time, in full) ensures correct quantities arrive within agreed timeframes. Modern platforms use 150+ factors including weather and traffic to provide dynamic ETAs. Punctuality rate is calculated by dividing on-time orders by total orders.
- Inventory to sales ratio (ISR): Compares average inventory value to net sales for a period. Rising ISR may indicate inventory growing faster than sales or declining sales. This metric helps identify whether inventory investments align with sales performance.
- Carrying cost of inventory: Usually 20-30% of total inventory cost, including expenses for labor, insurance, warehousing and freight. Calculated as inventory carrying rate × average inventory value. Lower carrying costs with high turnover indicate efficiency.
- Purchase order tracking: Provides immediate visibility into potential supply chain disruptions. Modern dashboards offer real-time, color-coded status updates on multi-modal shipments across suppliers, with product-level data refreshed every 15 minutes.
- Days sales of inventory (DSI): Measures the average days taken to sell inventory, indicating sales efficiency. High DSI suggests potential inventory management issues or hard-to-sell items requiring marketing intervention.
- Freight cost per ton shipped: Essential for accurate pricing and avoiding operational losses. Calculated by dividing total freight costs by units shipped per period. It can be broken down by transportation mode to identify cost-saving opportunities.
- Perfect order delivery Rate: An outward-facing KPI expressed as the percentage of "perfect" orders (meeting company-defined criteria) out of total deliveries. Requires excellence across all other supply chain metrics and serves as a selling point to customers.
- Supplier on-time delivery: Recognizes that your company's supply chain performance depends on your suppliers' efficiency. Inventory management agreements may be required with key suppliers to ensure they meet the same OTIF standards you set for your customers.
Meanwhile, operations management has a plethora of KPIs to measure, depending on which area you choose. For now, we will focus on eight financial KPIs commonly measured in operations management. These include:
- Accounts receivable for turnover - Measures how effectively a company collects payments, serving as an early indicator of market conditions.
- Days sales outstanding (DSO) - Tracks average time for clients to pay invoices, helping identify which clients to maintain relationships with.
- Operating cash flow - Monitors cash generated from core business operations, essential for business sustainability.
- Quick ratio - Provides a rapid assessment of financial health by measuring ability to cover short-term liabilities immediately.
- Accounts payable turnover - Indicates how frequently a company pays its suppliers, with higher numbers showing more timely payments.
- Cash conversion cycle (CCC) - Measures time required to convert inventory investments back into cash, combining inventory metrics with payment cycles.
- Operating profit margin - Calculates profitability after subtracting COGS and operating costs from sales, reflecting operational efficiency.
- Net profit margin - The bottom-line metric showing overall profitability after all expenses, crucial for assessing complete financial health.
Operations Management and Supply Chain Management in the Real World
Still wondering what supply chain management and operations management have to do with your career? Take a lesson from UAGC alum Miraj Simpson, BA in Supply Chain Management. Miraj has an eclectic background and a career path she’s excited to pursue.
“I think it’s definitely allowed me to be flexible,” she confirms. “I’m used to working in so many different environments. I am much more skilled at holding my composure when I’m in a situation I’m not familiar with. It’s also taught me to trust myself.”
On the operations management side, when Birchbox scaled to over a million subscribers, their operations hit a critical bottleneck. Their product assignment algorithm - the heart of their personalized subscription box service - was taking up to 50 hours to run, threatening deadlines and limiting growth. They brought in Princeton Consultants, who completely reformulated their mathematical optimization model using an innovative technique they called "Reciprocating Integer Programming." The results were transformative - processing time dropped from days to just 10 minutes, a 99% improvement. This allowed Birchbox to create more personalized boxes, quickly test new ideas, and even add an additional sample to each box without compromising quality. Their VP of Global Business Technology called the change "life altering" for their operations team. It's a perfect example of how solving a technical operations challenge can directly enable business growth and enhance customer experience.
Similarly, Toyota's production systems are widely recognized as some of the best in the world. Their success comes from perfectly merging theory with practice in operations management. They pioneered approaches like Kaizen, Lean Manufacturing, and Just-In-Time production that dramatically cut costs while increasing output quality. What makes Toyota stand out is their unique production system built around five key strategies: a proprietary production methodology, investments in re-engineering, emphasis on quality and technology, hybrid vehicle innovation, and exceptional employee management. Their competitive advantage really shines in their flexibility–production lines can switch between models with minimal downtime, and every worker has the authority to stop the entire production line by pulling the "Andon" rope if they spot a problem. This empowerment, combined with their Kanban pull system and Just-In-Time philosophy, allows Toyota to produce a car in just one day while competitors like GM need a day and a half. The results speak for themselves: Toyota consistently ranks as the second largest automaker globally, with forecasts showing continued growth, particularly in overseas markets. Their ability to eliminate waste, reduce inventory, and maintain exceptional quality while constantly adapting to market demands demonstrates why Toyota remains the gold standard for operations management.
Overview: Operations Management vs. Supply Chain Management
While operations management focuses on internal processes, supply chain management extends beyond organizational boundaries to encompass the entire network of entities involved in bringing a product or service to the end consumer. Both disciplines are crucial for organizations seeking to achieve operational excellence, deliver value to customers, and remain competitive in the market.