Evolution of Supply Chain Management

Evolution of Supply Chain Management

AUTHOR

chiefstaff

TIME TO READ

minutes 

UPDATED ON

July 28, 2020

Supply chain network Management Strategy and Capabilities evolved from primitive to esoteric in the four decades since the mid-1970.

In the initial phase (pre-1950), there was no need of any strategy for supply chains. In the decade that followed, supply chain strategy focused only on the overall profitability of the business.

Supply Chain strategy came into real existence only after the Materials requirements Planning revolution of the 1980s. Companies became aware of the growing material scarcity and started optimizing resources. Strategic activities were in the hands of a few key people in the organization. Strategic planning was highly inefficient due to a lack of data in a standard format. Planning was done without addressing ground-level problems.

The MRP revolution evolved into Enterprise Resource Planning (ERP) during the 1980s and the 1990s.

The strategy was based on the “PUSH” model. Enterprise-wide supply chains were capable of collectively forecasting the supply and demand levels.

The 1990s and early 2000s’ ERP revolution led to a migration from a PUSH model to a PULL methodology (build-to demand). Globalization and a search for cheaper locations led to manufacturing outsourcing. The introduction of Just-in-Time (JIT), Lean management manufacturing and Kanban by Japan, widely adopted in the west, led to flexibility in production.

Finally, businesses started to take an external view with the help of strategic partners and a focus on customers. Customer satisfaction became one of the criteria to decide supply chain success, leading to managing total cost and life cycle alliances. Faster and more precise operational response provided the capability to meet customer demands (time and reliability).

During the 2000s and into the present decade, trading partners and suppliers collectively developed innovative ways to reach customers. This led to logistics outsourcing and evolution of 4PLs. The supply system adopted organization alignment towards rapid innovation, and there was a quick introduction of new products. Emphasis on rapid decision making and fast response changed supply chains into supply network systems.


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