Evolution of Supply Chain Management

In order to have a better grasp of the subject, we will look at the evolution of supply chain management as well as the four stages of supply chain evolution, which will let you know the genuine transformation of SCM.

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Introduction to Supply Chain Management

Supply Chain Management is concerned with a system of purchasing operations management, logistics, and marketing channels so that raw resources may be transformed into completed goods and supplied to the final consumer.

SCM aims to manage a network of organizations participating in various processes and activities that result in the form of goods and services in the hands of the end consumer through upstream and downstream connections.

Supply and demand are brought together in SCM to provide better results. However, the real significance of SCM lies in the possibility that it may give businesses a considerable competitive advantage.

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Evolution of Supply Chain Management

The concept of supply chain management has its roots in the early eras of trade and industry when producers and merchants relied on modes of transportation including horses, carts, and ships to transfer commodities from one place to another. To further comprehend supply chain management, let’s go through each of the following evolutions individually.

Creation era

Keith Oliver came up with the phrase “supply chain management” for the first time in 1982. The early 20th century saw the development of the assembly line.

However, the phrase gained widespread use after Robert B. Hand Field and Ernest L. Nichols, Jr.’s influential book “Introduction to Supply Chain Management” was released in 1999. It sold over 25,000 copies and was also translated into Japanese, Korean, Chinese, and Russian.

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Integration era

With the development of electronic data interchange (EDI) systems in the 1960s and the advent of enterprise resource planning (ERP) systems in the 1990s, this period of supply-chain management research was highlighted.

With the growth of Internet-based collaborative technologies, this age has continued to advance into the twenty-first century. In this phase of supply-chain evolution, integration drives down costs while simultaneously raising value added.

Also, check out the blog on Supply Chain Digital Transformation.

Globalization era

The globalization period which is the late 1980s is the third stage in the history of supply-chain management, which may be identified by the focus on global networks of supplier connections and the growth of supply chains over national boundaries and onto other continents.

The globalization of supply chain management inside businesses, aiming to boost their competitive edge, provide value, and cut costs through global sourcing, defines this period.

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Specialization era (Phase I)

Businesses started putting more emphasis on “core competencies” and specialization in the 1990s. They stopped integrating vertically, offloaded non-core operations, and outsourced those jobs to other businesses.

Due to the supply chain’s expansion outside of the company’s boundaries and the distribution of management among specialized supply-chain partnerships, new management requirements emerged.

In order to develop, manufacture, distribute, promote, sell, and support a product, the specialization model establishes production and distribution networks made of several separate supply chains specialized to producers, suppliers, and customers.

Specialization era (Phase II)

With the development of transportation brokerages, warehouse management (storage and inventory), and non-asset-based carriers in the 1980s, the supply chain began to specialize.

Today, this specialization extends beyond transportation and logistics to include aspects of supply planning, collaboration, execution, and performance management.

Since its introduction in the late 1990s, outsourced technology hosting for supply-chain solutions has become popular in transportation and collaboration.

Also, read about the bullwhip effect in the supply chain.

Four Stages of Supply Chain Evolution

The four components of the supply chain are integration, operations, buying, and distribution which work together to provide a route to competitiveness that is both affordable and effective. Let’s discuss each stage in detail which is as follows:

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Integration

Integration is crucial across your communications, information sharing, data analysis, and storage processes and begins at the strategic planning stage.

Examine your technological requirements and make sure the solution you choose will provide you with the tools you need to integrate a complete supply chain solution while being adaptable enough to develop and expand with your company.

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Operations

In order to track output and distribution patterns, your operations need an accurate, real-time depiction of your inventory and production plans.

Enhance your profitability by anticipating potential setbacks and obstacles to lessen the impact they will have on your company. You should also optimize your operational procedures to provide a faster, less expensive route to fulfillment.

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Purchasing

The right supply chain software does a great deal in terms of sourcing products in your supply chain and ensuring you are taking advantage of the most competitive pricing and reliable products.

Keep track of suppliers, competing producers, and demand cycles, so that you can reduce your operating costs across the sourcing and purchasing process.

Distribution

A part of your supply chain that can constantly be streamlined, improved, and rectified for better customer service and lower operational costs is the transport, delivery, and return of items.

In order to have a real-time view of inventory, order status, and stock location regardless of whether an order originated in-store or online, your delivery and returns procedure should be centralized.

Also, read our blog on the role of IT in supply chain management.

Conclusion

The success of supply chain management depends greatly on ongoing development, much like any other industry. Continuous improvement is more important for every firm as we enter a world dominated by technology. Due to the significant need in the market for supply chain management professionals, if you’re hoping to launch a career in supply chain management, you may expect a bright future.

If you still have any doubts or queries in your mind then ping your queries on Intellipaat Community Page.