The Evolution of Supply Chain Management: A Brief History
Supply chain management deals with the procurement of raw materials and operations that see these materials manufactured into finished products. Logistics management and marketing are also important aspects. They ensure the end customer receives the finished product.
Supply chain management (SCM) is essential to many businesses. Supply chain disruptions can result in shortages and price increases.
The process of SCM includes risk management and contingency planning to mitigate potential issues.
This article will explore the evolution of supply chain management. This will include the early days of trade and how developing technology and globalization have affected it.
We will also look at potential developments for the future of supply chain management.
To find the origins of trade you would have to travel back to around 3000 BC. Ancient Mesopotamians and Egyptians are known to have traded valuable materials such as cloth, spices, and metals.
The trade developed as civilizations grew. Over time, cities began to trade with one another based on the natural resources they had at their disposal.
The development of transportation also played a part in the history of trade. Sea routes were exploited by the ancient Greeks who could travel further to trade their goods.
The ‘Silk Road’ was a route network used by traders from the Roman Empire, India, and China. The routes remained popular until the 15th century.
The age of exploration followed between the 15th and 17th centuries. European explorers traveled the seas in search of new lands.
Exploration and the “discovery” of different territories brought a range of issues. The spread of disease, war, and colonization were all a result of this.
One positive aspect to come from this was expanded trade routes. Developments in shipbuilding and navigation during this time also helped.
These trade routes opened up trade between areas that had access to materials and other natural resources that others didn’t. This supply and demand facilitated the growth of trade and trade routes.
The Industrial Revolution
Early supply chains typically took place in local communities. Improved transportation allowed this to spread further afield.
The industrial revolution took place between 1760 and 1840. This saw manufacturing and production move from hand-made products to machine-made ones. Improved efficiency allowed higher production levels. Mass production was born and helped supply chains grow.
During this time, U.S. railroad infrastructure improved and created new trade routes across the country.
The efficiency of the routes defined by the Age of Exploration improved trade. One example of this is The Suez Canal which was completed in 1869. This meant merchandise could be moved between Africa, Asia, Europe, and the Americas more easily.
The Panama Canal’s creation in 1914 is another example of how trade routes developed.
The Post-World War II Era
Supply chain management developed following World War II thanks to military logistics developments.
The combination of industrial engineering and supply chain operations created supply chain engineering.
Transport management and intermodal container development made the transportation of containers easier. It meant that the same containers could be transported by truck, train, and ship.
Global supply chains benefitted from intermodal containers and allowed a more efficient way for products to be moved on land and sea.
The National Council of Physical Distribution Management was formed in 1963. This was because road transportation grew to be the most popular option in America.
Physical distribution is closely associated with transportation. It is the distribution of finished products from the distribution networks to the consumer or end user.
Logistics providers like UPS, FedEx, and DHL made physical distribution easier by the 1970s.
Warehousing management also took a leap forward in the ’70s. This is when JC Penney introduced the first WMS (warehouse management system). Efficient warehousing allowed real-time stock inventory updates.
Stock inventory management data provides supply chain managers with valuable information. It allows warehousing costs to be reduced and makes finding stock easier.
Global supply chains and international trade grew exponentially during this period. Improved technology helped with efficiency and communication leading to this rise in trade.
The 1980s and 1990s
In 1982 the term “supply chain management” was first introduced by Keith Oliver. While the processes had been in place for years, this was the first time it was called this.
The introduction of computers in the ’60s and ’70s laid the groundwork for developments during the ’80s and ’90s.
GeorgiaTech formed a range of research centers to explore how useful computer technology could be and how to apply it. The research centers included:
- The Material Handling Research Center
- The Production and Distribution Research Center
- The Computational Optimization Center
Improved computer technology and access allowed greater supply chain efficiency. Logistics planning also benefited from this.
Streamlining and improving supply chain management were made significantly easier with improved technology. It made data gathering and analysis easier. This allowed supply chain managers to identify areas that were not performing to a high standard. Automation also improved efficiency and real-time visibility.
The National Council of Physical Distribution Management changed its name in 1985 to the Council of Logistics Management (CLM). This reflected the developments in the supply chain industry. It covered the reverse flow of products as well as inbound and outbound operations.
The developments made in the 1980s and ’90s facilitated integrated supply chain management. Integrated supply chain management is when a centralized system manages:
- Supplier relationships
- Logistics processes
Electronic data interchange (EDI) allowed more efficient communication between businesses. Purchases and invoices could be transferred electronically. This improved speed and reduced the physical storage of documents.
Improved technology also allowed real-time needs to be met. This allowed a more efficient process known as just-in-time (JIT) manufacturing to be implemented.
JIT manufacturing is also known as lean manufacturing. This is when manufacturers provide consumers with products as they are needed. It moved away from traditional processes that would supply customers with existing stock.
This way of thinking helped to streamline processes and minimize excess stock and warehousing costs.
The 2000s and Beyond
Supply chain design underwent further improvements with risk management being a major implementation.
By implementing a forecasting system, supply chain managers could get a better idea of potential market needs. Advanced planning allows supply chains to meet market demands.
Risk management is also used to vet potential suppliers and mitigate the risk of disruptions.
Supply chain disruptions can be caused by a variety of internal factors. Issues with one link in the chain can lead to significant delays and costs to the entire supply chain.
External factors must also be considered. The political stability of nations involved in the supply chain can lead to delays or rising costs. Global pandemics and natural disasters can also create significant problems for supply chains.
Supply chain managers create contingency plans to mitigate risks. Contingency plans are based on data analysis. They can include alternative suppliers or logistics solutions.
The growth of e-commerce and omnichannel retail has changed the face of sales. It allows people from all around the world to access products and is another example of supply chain globalization.
E-commerce and omnichannel retail require fast-moving supply chains. Strategic coordination is required to keep up with this demand. The latest technologies will help supply chain management professionals manage these needs.
Big data analytics discovers trends and patterns, which can be used to supply chain management professionals predict market needs.
Enterprise resource planning (ERP) systems allow real-time business process management. These systems use developing technology and software to automate performance. It can also help with optimization.
The Future of Supply Chain Management
The future of supply chain management is yet to be determined. However, the use of emerging technologies like AI and automated systems looks to be a part of it.
AI can be used to study large amounts of detailed data to provide accurate forecasts. It can also help to improve efficiency by identifying performance issues.
This will allow supply chain managers to come up with solutions that will benefit the supply chain as a whole.
Automated warehouse management and fulfillment will also help to reduce costs and minimize the risk of human error.
Automation allows real-time visibility across the supply chain. Supply chain managers, stakeholders, and customers all benefit from greater visibility.
AI is an emerging technology that is developing rapidly. Because of this, it is essential for supply chain networks to keep up with emerging trends and technology.
The future of supply chain management will also be affected by sustainability. Corporate social responsibility should also be a consideration.
Supply chain globalization provides the opportunity to benefit from cheaper materials and labor. It is essential that supply chains do not exploit workers in countries where they do not have the same rights.
Supply chains will also have environmental responsibilities to consider. Governments and customers are demanding that businesses minimize their carbon emissions. Because supply chain management relies on freight transportation, this can be challenging.
Sustainable suppliers and environmentally friendly processes will be a part of supply chain networks in the future.
Supply chain management history is long and varied. From the beginnings of trade, rudimentary supply chains were created. These early forms of supply chain networks were based on supply and demand as well as barter.
Trade networks rapidly expanded from local to global and supply chains adapted to facilitate this as efficiently as possible.
The industrial revolution was the catalyst for rapid change. This escalated to the technological changes of the 80s and 90s. Since then, technology has continued to improve. This has allowed supply chain management to further improve efficiency.
Understanding the history of supply chain management can help supply chain professionals. It will make it easier to determine potential future developments.
This will allow supply chain management to improve. This is great news for consumers that want products to be delivered quickly. It can also help with the overall cost of the end product and profitability for the businesses involved.
When did supply chain management start?
Supply chain management was first given this title in 1982, however, early traders that planned and traded materials created the original supply chain management systems.
What are the key innovations in supply chain management?
Key innovations in supply chain management include the implementation of AI and automation.
The use of new technologies to streamline the supply chain process has greatly improved efficiency.
What is operations management in the supply chain?
Operations management in supply chains is the planning and organization of day-to-day processes. It also includes the monitoring and assessment of supply chain activities.