Early in the 20th century, executives and business owners had to make decisions regarding their supply networks based on experience and intuition. They had no formal experience in logistics or supply chain management. Supply restrictions, labor costs, shortages, unforeseen supply and demand fluctuations, inflation, and logistical challenges have all combined to cause significant disruptions. The McKinsey Global Institute estimates that supply-chain disruption losses averaged 42% of annual earnings before interest, taxes, depreciation, and amortization over a ten-year period. However, modern customers and partners have become more aware of these roadblocks and expect supply chain transparency tailored to their professional requirements
Today's supply chains are more sophisticated and effective than ever, thanks to the adoption of novel handling techniques, the use of ocean-going vessels, containerization, and digitalization. This has made it possible to regulate the supply chain and build resilience compared to prior eras.
Let’s stroll down memory lane to see how much supply chain management has evolved and what the future holds.
History of supply chain management
The recent disruptions in supply chains have had a huge impact on businesses and consumers' everyday lives all over the globe. For instance, we've seen the repercussions of shortages of toiletries and sanitizers that caused chaos during Covid-19. To prevent future disruptions and safeguard the global economy, we must comprehend the development of supply chain management throughout history.
Pre-1900s: Local supply chains
Prior to the 20th century, supply chains were primarily localized before the first industrial revolution. This indicated that most commodities were only distributed locally, and the distance across which commodities could be distributed increased along with the introduction of railroads. As a result, supply chains became progressively intricate and organized, which later symbolized the industrial revolution.
1900-1950s: Growth of supply chains
Between the 1900s and 1950s, as businesses like UPS started to emerge, the global supply chain started to take shape, paving the path for effective manual operations. Following the Second World War, business leaders began examining ways to enhance manual processes, explore automation, and highlight the advantages of analytics in military logistics. The term "unit load" gained popularity before the 1950s and was later applied to transportation management. Due to the improved efficiency and effectiveness of business operations, the global supply chain could continue growing and developing.
1960s-1970s: Physical distribution
In the 1960s and 1970s, logistics and transportation experienced rapid growth. This was made possible partly by the increased truck usage, which made it possible to carry time-sensitive freight. The global supply chain was transformed when two of the most well-known logistics providers, DHL and FedEx, entered the industry in the 1960s and 1970s.
1963: Key breakthroughs
The National Council of Physical Distribution Management was established to aid in the logistics industry's modernization. IBM created the first automated inventory management and forecasting system to streamline and enhance productivity. This significantly improved the delivery of goods and products to consumers.
1975: First real-time WMS
JCPenney developed the first real-time warehouse management system (WMS) in the 1970s. Instead of wasting time looking for lost stock, this offered the business more time to focus on growth and expansion. This completely transformed the game by enabling real-time stock tracking and updating.
1980s: Inbound, outbound, and reverse flow
By the mid-1980s, supply chains were considered expensive, crucial, and challenging business functions. As a result, supply chains gained easier access to planning tools like spreadsheets and map-based interfaces. Because of this, organizations could better perceive their supply chains and decide where to deploy their resources.
1982: The term “supply chain management” coined
On June 4, 1982, Keith Oliver coined the phrase "supply chain management" for the first time. Supply chain management is the process of planning, executing, and controlling the supply chain's activities. It covers the entire flow and storage of raw materials, inventory of work-in-progress, and finished commodities.
1990s-2000s: Tech revolution and globalization
During this time, the supply chain industry prospered using innovations like improved planning and scheduling, increased international imports and exports, and corporate resource growth. However, d to the enhanced efficiency and streamlining of operations, businesses were able to boost their profits and improve their bottom line.
1996: Invention of cobot
A cobot, or collaborative robot, is a versatile robot that interacts with people and reduces manual labor. This innovation resulted from a 1994 General Motors project to develop robots or robot-like machinery that was secure enough to work alongside mankind. Cobots have been employed in various industries, including manufacturing and healthcare.
1997: Amazon goes public
In July 1995, Jeff Bezos, Amazon's founder and CEO inaugurated Amazon's online store. On May 15, 1997, it began trading on the stock market for $18. The company was the first online store to reach one million customers. Amazon now has a market value of over $1 trillion and operates globally. We can now shop online and have anything delivered to our doorsteps, thanks to Jeff Bezos and Amazon.
2010-2020: Industry 4.0
Industry 4.0 has been a driving force behind digital transformation efforts for businesses worldwide. This decade saw a trend toward cloud-based programs and services, allowing for more effective data processing and storage. Real-time analytics, which gives quick insights into operations, also expanded extensively. These technological developments made organizations more adaptable and receptive to market changes, which led to a major rise in productivity and profitability.
When Covid-19 swept across the world, supply chains came to a grinding halt. However, to minimize the pandemic's repercussions, localization and further digitization investments were rolled out.
2022: Russia-Ukraine conflict
The Russia-Ukraine conflict is significantly impacting global supply chains. Experts at a virtual symposium organized by the MIT Center for Transportation and Logistics claimed that it obstructs the movement of goods, drives up costs, and causes product shortages. The UN has even issued a warning, stating that a global food crisis is "one step away" due to the catastrophic circumstances.
Additionally, commodities other than food are being impacted. For example, the ongoing war disrupts energy and other vital supplies. As a result, customers will have to pay more and wait longer, causing pandemonium for businesses that depend on just-in-time delivery systems.
So what can be done to minimize the crisis's impacts?
2022 and beyond: The future of supply chain management
In the wake of the recent global pandemic, supply chains worldwide are looking for ways to optimize their transportation spend management and prepare for future changes. Leading suppliers are developing and implementing more technological solutions that enhance visibility, data quality, and carrier partnerships. According to Gartner, 50% of all global product-focused businesses will have invested in real-time transportation visibility solutions by 2023.
Global supply chain leaders must seize the opportunity and adopt higher-value supply chain strategies to meet the needs of customers, employees, shareholders, and society. Digital transformation, increased sustainability, and workforce evolution is among the key trends that will shape the future of the global supply chain.
Lessons for resilience within supply chain disruptions
The more you understand the background and the causes of the current supply chain disruptions, the more you can apply what you've learned to targeted modernization projects that enable more proactive and resilient operations. This is crucial, especially as enterprise IT priorities continue to rise along with supply chain analytics and enterprise investment.
Lack of real-time visibility into the entire supply chain is the underlying cause of most failures, making it difficult to react rapidly to unforeseen changes. For example, in a survey conducted by McKinsey, 71% of company executives said their companies were more at risk from supply-chain disruption than before. Unfortunately, too many organizations are still ill-equipped to achieve such visibility. Instead, they are hampered by many systems, siloed data, and manual processes that are cumbersome, slow, and prone to errors.
To understand the influence on customer experience, network flows, chain of custody, compliance, and more, intelligent digitizing systems can record all interconnections and asset dependencies. As a result, organizations can become better equipped to forecast problems, mitigate them, and develop resilient strategies using data-intensive digital twin modeling of supply chains. As a result, organizations competent in deploying such capabilities gain great value.
Digital Intelligence for “around the clock” visibility and control
As core causes are clarified, several crucial characteristics become apparent. A shift from "point in time" supply chain management planning to "around-the-clock" analytics is essential. This can be accomplished through collaborative data exchange and intelligent digitization across partners within a larger ecosystem.
Adopting real-time technologies like advanced analytics and AI to automate supply chain risk management is crucial. It also promotes greater resilience, transparency, and the capacity to act swiftly and cooperatively. Regardless of the data's origin or where it can be stored, such visibility must be complete and cover all sources. This includes edge nodes, data centers, IoT sensors, environmental contexts, enterprise applications, logistics systems, vehicles, locations, or other parts of the extended value chain. This provides the insights and intelligence needed to manage volatility and risk in the present.
Modern supply chains' constraints are too great and numerous to allow for anything less than an aggressive change. Unfortunately, there's no alternative to intelligent digitization to deliver additional levels of real-time visibility. This visibility will go a long way in overcoming even the worst supply chain disruptions.
Gathering timely and pertinent data gives enterprises the power to alter strategies, discover new transport options, and take other decisive actions to boost profitability and bottom lines. Businesses that will thrive in the new era of supply chain problems won't just stay ahead of disruptions; they'll also figure out how to outperform the competition.
Businesses can explore improved supply chain analytics, resilience, and growth plans and turn disturbances into opportunities with a robust next-generation AI-driven digital supply chain platform that supports their physical supply networks.
Tredence helps you build this capability by providing a comprehensive picture of your supply chain and actionable insights to maintain low costs and high performance.