History of Supply Chain Management

[INFOGRAPHIC] The History and Progression of Supply Chain Management

History of Supply Chain Management

The 100-year history of supply chain management began with improvements of basic, labor-intensive processes and progressed to current day engineering and complex international networks. Let’s explore the past 60+ years and enjoy a remarkable infographic below.

Supply Chain Management’s Beginnings

The supply chain industry’s beginning of operations research as well as industrial engineering started with logistics. Fredrick Taylor, the founder of industrial engineering who wrote The Principles of Scientific Management in 1911, targeted the process improvement of manual loading in his work. Operations Research of analytics’ value started during WWII for logistical military operational solutions in the 1940s. Industrial Engineering and Operations Research often attempted to function as separate identities and by using integrated frameworks to address supply chain and logistics issues they have had successes. The industry has begun titling this integration “Supply Chain Engineering.”

The Early Years of Supply Chain Management

Pallet and pallet lifts mechanization was the research focus of logistics circa 1940 and 1950 to obtain better warehousing space, racking and layout. The “unit load” concept and pallet use became popular, extending to transportation management in 1950 by utilizing intermodal containers together with ships, trains, and trucks to transport them. This set the stage for supply chain globalization. This function fits more as fundamental applications of industrial engineering rather than it’s own discipline of ‘warehousing’.

Time-sensitive freight transportation steered toward trucking rather than railroad as a trend in the 1960s. “Physical Distribution” became a joint need (warehousing, material handling, and freight transportation). In 1963, the National Council of Physical Distribution Management organization became the field leader and much research and training took place with wide industry and scholastic recognition, particularly due to the advent of computing in the 1960s and 1970s and the resulting paradigm shift. Before 1960, manual records and transactions were the norm until data computerization created opportunities and innovations in logistics planning such as randomized warehouse storage, truck routing and optimization of inventory. Operations Research technologies, in particular, were all that were available so theoretical models were all that researchers had to examine in transitioning from theory to practice. In the late 1970s and early 1980s, this led to the creation at Georgia Tech of the Production and Distribution Research Center, the Material Handling Research Center, and the Computational Optimization Center. Each center focused on different aspects of what could be done with computing technologies.

Logistics’ Coming of Age

During the 1980s, personal computing began a logistics transformation with marked improvements in supply chain management. With access to computers, planning surged ahead with unprecedented graphical interfaces. An emergence of new technology like flexible spreadsheets and map-based interfaces significantly improved logistics planning and execution technology.

The earliest to innovate was the Production and Distribution Research Center using joining map interfaces with optimization models for supply chain design and distribution planning. Also forging ahead with new control technology for material handling automation was the Material Handling Research Center. Massive algorithms for airline schedule flexibility were produced by the Computational Optimization Center. Commerce quickly benefited from these new ways of using technology.

A key logistics trend in the 1980s was its reputation for being really costly to acquire and complicated to operate, yet absolutely crucial to corporate profits. By1985, the National Council of Physical Distribution Management became the Council of Logistics Management (CLM) “to reflect the evolving discipline that included the integration of inbound, outbound and reverse flows of products, services, and related information.” Beforehand, the term had been mostly reserved for military logistics.

The Technological Revolution in Supply Chain Management

In the 1990s, Enterprise Resource Planning (ERP) systems were created during the logistics boom and after the successes of the 1970s and 1980s Material Requirements Planning systems. The challenging plan to integrate the various, disconnected company databases as a failsafe for Y2K preparedness succeeded while also providing a major data access and accuracy upgrade. ERP software identified planning and integration needs for logistics components resulting in a new generation of “Advanced Planning and Scheduling (APS)” software.

Globalization and Supply Chains

Globalized manufacturing such as the growth of manufacturing in China in the mid 1990s popularized the term “supply chain”. China’s exports to the U.S. went from $45 billion per year in 1995 to over $280 billion per year by 2006. The sheer complexity of global networks spotlighted how critical logistics strategies now coined ‘supply chain management’ were for successful strategic issues and logistics for corporate tactical and operational issues. Supply chain management being coupled with strategy is also evident in the Council of Logistics Management’s changing its name to the Council of Supply Chain Management Professionals in 2005.

Supply Chain and Logistics in the Future

After the 1980s, computer technology has far outpaced supply and logistics utilization. Internet use has skyrocketed, changing our perceptions of communication. Yet, supply chain and logistics planning remains centered upon the distributed models after the advent of personal computing. With academic research, a new generation of supply chain and logistics planning technology based on centralized planning with distributed collaboration is in reach. The value of research for the advancement for traditional supply chain and logistics areas like warehousing and distribution, transportation, and manufacturing logistics is exceptional. Multiple non-traditional areas like health care and humanitarian logistics will also reap remarkable benefits utilizing traditional supply chain and logistics and the global insights accessible with systematic supply chain and logistics performance research is immensely valuable to world markets.