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Know Your History: The Evolution of Supply Chain Management Part II

Michael Wilson | Apr 22, 2014

Though the term is relatively recent, supply chain management as a concept has been around for at least a century, in one form or another. In our last installment, we explored the ...

supply chain management -history

Though the term is relatively recent, supply chain management as a concept has been around for at least a century, in one form or another. In our last installment, we explored the history of the supply chain from the assembly line to the global "supply web." Now we look at the continued evolution of supply chain management, through to the present day.




In our last installment, we talked about vertical integration: one company owning their entire supply chain, in order to maintain better control over it and reduce risks. For a number of companies and industries, vertical integration remains an important part of their supply chain management. But starting in the 1990s, many industries began to move away from vertical integration and started outsourcing various links in their supply chain to other companies around the globe.

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While outsourcing means giving up some of the control that vertical integration afforded these companies, it can also mean reducing their production costs. In addition, outsourcing allows for a higher quality of product. A vertically integrated company has to be a "jack of all trades," with the resources to do everything themselves, but not the focus it takes to do anything really well. Outsourcing allows you to farm out each level of production to a company that specializes in that particular thing, while your company focuses on the aspect of production that you do best, thus ensuring the best quality possible.

Supply Chain Management SaaS

A different method of specialization is the development of software as a service platforms. Rather than specialize in a particular aspect of production, there are now companies that specialize in the supply chain itself. They produce software tools that allow their clients to track each link in their supply chain from a single source.

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These tools analyze market trends and patterns to predict changes in the availability of materials. They can then alert company management about these changes in advance and help them to track down an alternate source of the material they need, before it affects production.

SCM 2.0

Modern supply chains combine the trends of specialization and globalization to build worldwide supply webs, which still manage to focus on quality at each individual link. It's somewhat akin to Web 2.0, which takes the vast archives of available information on the web and makes it usable for collaborative work: each user builds and improves on the efforts of the previous users to create something newer and better. Likewise, SCM 2.0 turns supply chain management into a worldwide collaborative platform, wherein buyers and suppliers work together to create the most efficient methods for reducing costs and expediting the production process across the board, while still maintaining quality.

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Supply chain management has come a long way since the days of Henry Ford and the assembly line. It's a complex and ever-changing field that connects people across the globe, who all depend on one another to produce the goods consumers buy. Who knows what the future holds for supply chain management?

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