Evolution of the Supply Chain Management

The evolution of supply chain management has been characterized by increasing integration of separate tasks, a trend underlined in the 1960s as a key area for future productivity improvements since the system was highly fragmented. Although logistics tasks have remained relatively similar, they initially consolidated into two distinct functions related to materials management and physical distribution during the 1970s and 1980s. This process moved further in the 1990s as globalization incited functional integration and the emergence of logistics in a true sense. All the elements of the supply chain became part of a single management perspective.

However, only with information and communication technologies did a more complete integration became possible with the emergence of supply chain management. It allows for the integrated management and control of information, finance, and goods flows, making possible a new range of production and distribution systems. Supply chain management has become a complex sequence of activities aiming at value capture and competitiveness. More recently, the growing level of automation of supply chains has been a dominant element of the evolution of both physical distribution and materials management. This digitalization is particularly notable within distribution centers that have experienced a remarkable push towards automation such as storage, materials handling, and packaging. Automation may eventually lead to automated delivery vehicles.

Stepwise and according to improvements in information and communication technologies, the two ends of the assembly line became integrated into the logistics of the supply chain. High rack storage, which later became automatically driven, or the internal movement of packages by flat robots were early expressions of logistical engineering. Initially, logistics was an activity divided around the supplying, warehousing, production, and distribution functions, most of them being fairly independent. With the new organization and management principles, firms followed a more integrated approach, thus responding to the upcoming demand for flexibility without raising costs. At the same time, many firms took advantage of new manufacturing opportunities in developing economies through outsourcing and offshoring. As production became increasingly fragmented, activities related to its management were consolidated. Spatial fragmentation became a by-product of economies of scale in distribution.

The Stages of evolution in Supply Chain Management

There are a total number of 5 stages in the evolution of the supply chain industry. These 5 stages include:

  • Stage 1 The early 1980s
  • Stage 2 Late 1980s
  • Stage 3 The early 1990s
  • Stage 4 Late 1990s
  • Stage 5 The twenty-first century

Stage 1: Consolidation

Starting from the early 1980s, businesses focused on products. They focused more on quality and the key performance metrics were – inventory turns and production cost. For the purpose of achieving inventory turns, small companies began merging into larger organizations. This also led to organized planning of the production cost which further resulted in becoming a good solution for most businesses.

Stage 2: Integration

In the late 1980s, businesses shifted their focus from products to the volume of output. Keeping a close eye on the cost, the key performance metrics for Stage 2 of the supply chain evolution turned out to be production capacity and throughput. Companies that started making profits in the earlier stage now analyzed that just production cost will not help them in making more profits. And for this reason, the rate of production and the volume of production became important. By the end of this stage, companies found their solutions.

Stage 3: Market Value

Then came the third stage of the supply chain evolution which began in the early 1990s. Organizations in this stage started to focus more on market-driven results. The key factor of this stage of evolution was product availability and the performance metrics were clearly – market share and order fill rate. Now the problem was not about making more products but about delivering them to the markets. So, by the end of this stage, businesses had the solution again and were onto their next stages of growth for even better results.

Stage 4: Brand Value

During the late 1990s, firms analyzed that customers were the game changers for revenue generation. This is when they shifted their business strategies and made ‘lead time’ the key factor in their goals. With this, the key performance metrics changed from market share and order fill rate to customer satisfaction, value-added, and response time. Companies now had the time to analyze that products that were made with a prime focus on customers were what sold out more. That’s how companies started focusing on products that added value to their companies.

Stage 5: Automation

The twenty-first century is more driven by knowledge and that is why having more information is preferred to be ideal for a company’s supply chain management. The key performance metrics for the 5th stage of supply chain management is real-time communication and business intelligence. Over the years, with a growth in each segment of the supply chain, employment has also increased. With more people in the circle, communicating every little detail to each person has become a task. The process of storing information also began to get hectic and for all these reasons, automation started out to be the focus for companies to grow.

Today, all the companies using automation throughout their supply chain are the companies that have a bigger scope to grow. With each stage of the evolution, companies found their solutions, and likely, this stage will also be smooth in transition for those who live up to the changing strategies for their business growth – focus on automation. Keeping automation as a solution for real-time communication and business intelligence, your organization will get the chance to rise above and move on to the next big solution of the next stage of the evolution.

Supplymint for Automation: The solution for the 5th stage of Evolution

To address the problem of automation before the next evolution in supply chain management, you can get in touch with Supplymint. We’re helping organizations in making smooth transitions towards automation. This will help your organization in becoming intelligent because you’ll have all the information you need to make the ‘one right decision’ for your organization’s growth and prosperity with the least cost and wastage.

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