For many years, supply chain management has been essential to the way businesses function. The actual term didn't come into use until the 1980s, but the concept of keeping track of the materials used in production -- where they come from and what factors affect them -- has been around for much longer. Let's take a look at the evolution of supply chain management through the years.
The earliest forms of supply chains began with the development of the assembly line. Complex machines like the Ford Model T had a lot of very specific parts and components, so the factories that manufactured them required a large supply of each of those parts. If a part on the assembly line suddenly became unavailable for any reason, then major changes would have to be made in the production of the machine, in order to do without that part. For example, the product might have to be completely re-engineered to use some other component instead.
With the development of electronic communication, suddenly materials were easier to procure. This also allowed each link in the supply chain to collaborate more easily with both their suppliers and their customers. Say there's a shortage of cotton due to a drought. In the early stages of supply chain management, it was difficult for cotton suppliers to alert in advance the customers who would be affected by this shortage. They'd find out when they ran out and went to order more, at which point, production would grind to a halt.
But with the rise of supply chain integration, every link in the chain became connected to one another. The cotton farm could alert the textile manufacturers immediately that there was a problem, allowing them time to make other arrangements, and the textile manufacturers could in turn alert their customers, the clothing manufacturers, just as quickly.
This improvement in communication also led to an increase in vertical integration: a single company controlling every link on their own supply chain in order to reduce risks from outside factors. Most major oil companies do this, finding and drilling their own oil, refining it, and shipping it to their own stations to be sold as gasoline.
As communication has continued to improve, supply chain management has become globalized. While an intercontinental supply chain has been around for thousands of years, since sailors first brought back goods from far-off lands, the advancements in both global communication and global transportation have made it faster and more efficient, allowing it to expand in new directions. Now, the supply chain has become less of a chain and more of a web, with tendrils reaching to different suppliers all around the world. If your suppliers in Europe are having problems, then your suppliers in Asia can come through for you instead, ensuring that production continues uninterrupted.
This is only the beginning of how the supply chain has grown over the years. Stay tuned for part 2 of our look at the evolution of supply chain management.