The Evolution of Supply Chain Management

The Evolution of Supply Chain Management

The evolution of supply chain management has been characterized by an increasing degree of 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 the 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 a 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 the implementation of modern 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 and made 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: the timely supply of raw materials and components from outside and the effective organization of distribution and marketing. 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.