Supply Chain

Supply Chain Management:

Historical Development (E)

What was the evolution history of supply chain management? What are the main components of supply chain? How big is the importance of supply chain integration?

Posted: Jul 2011

About fifty years ago it was obvious that if the company produces some item, it would be purchased and consumed eventually. The pace of changes of habits and technology was slow enough to allow any product in almost any quantity to be sold sooner or later.

But times has changed. The information technology accelerated, markets globalize, political economies stabilized, boundaries opened and the world suddenly became smaller. Consequently, increasing number of world-class companies appeared and started competing on a global basis. What did companies do? Once they realized that their survival is under jeopardy, they began to change.
The products change quickly, following the trends in technology. Consequently, the habits of consumers are changing quickly. This caused the companies to be very careful in planning, since the products are becoming obsolete very quickly. In that situation it is very important to stay innovative, lean and responsive to change in the market.
The different decades brought the following shifts:

• 1970s. Companies were focused on making internal changes. While these changes mainly focused on reduction of inventory levels and distribution costs, they also targeted reductions in plant lead times, supplier lead times, and safety stock. Furthermore, other pressures, like exploding increase of fuel prices and interest rates as high as 20%, pushed companies to focus on transportation and inventory management.
   

• 1980s. The decade of the '80s brought three major changes in supply chain management. First, manufacturers focused on reengineering supply chain cost structures to lower operating costs and assets. The second major change was a shift from costs reduction towards improving customer service. The third movement involved the internal integration of logistics within companies.
   

• 1990s. Customer service continued to be in manufacturers' focus. Companies entered into new agreements with existing partners as well as rationalized existing distribution channels. Companies began to realize the importance of forming external partnerships, contrary to focusing on cooperation and communication within their own walls. The '90s also brought a trend of integration of logistics. Statistic shows that 60% of all companies today have made significant progress toward obtaining the integrated logistics system.
   

• 2000s. New technologies, such as RFID (radio frequency identification), continue to appear and improve. Increased global sourcing and co-operation on design development demand planning, and planning among supply chain members have also appeared. Consequently, there is a strategic growth in both national and international supply chain groups. While globalization has increased, environmental, social and security considerations continued to play a great role in supply chain decisions.

Continue Reading:

Overview of Supply Chain Components
Historical Development of Supply Chain
Traditional and Modern View to Supply Chain
Supply Chain Activities
Procurement
Order Processing
Demand and Supply Planning
Inventory Management
Warehousing
Transportation
Customer Care
Integrated Supply Chain
Product
Information
Financial Resources
Integration vs. Non-Integration