A brief History of Supply Chain Management!

Most of us tend to believe that the Supply Chain Management is a relatively newer concept which had its genesis during the massive industrialization and mechanization just before the second world war loomed over Europe. Though it’s quite true that this was the time when organizations around the globe began to focus on industrial engineering and supply chain management, history of supply chain traces back thousands of years ago when Roman and Chinese traded via the ancient silk route connecting two great civilizations which were almost 7000 miles apart. So, let us have a closer look into the interesting history of supply chain and its evolution to the sophisticated branch of engineering (or management) it is today.

The advent of trade and business

From time unknown, humans had a penchant for trade. The precursors of foreign (or long distance) trade can be found back in the 19th century BC, where historians have discovered the existence of an Assyrian (modern day Iraq) merchant colony in Cappadocia (modern near Turkey). It was not a single instance, Egyptians traded with almost every coast along the Red sea; Indian merchants and Arab merchants traded myriad things; Chinese merchants traded along the coast of ‘Huang-He’ (popularly known as Yellow river) and so on. Along with the growth of various human civilizations, the volume and complexity of these trades grew along with that. The increase in the variety of goods coupled with competition to reap maximum profits from trade, merchants started pondering ways to minimize the cost. Things started to heat up when kings and queens all over the world got into the business of trade as they saw the huge potential to increase their incomes through taxes from international trade. They started building roads, river ports, and even seaports to help the traders trade their goods far across. A classic example of this is silk road (207 BCE- 220 CE) which was a complex network of trade routes that connected East to West. Though no one might have ever coined the term supply chain back then, initiatives like silk road, inland ports, and well-crafted waterways, etc. are clearly the prelude to more complex and well-connected infrastructure aiding supply chain of various businesses today.

The era of Discovery

In the year 1492, an Italian sailor Christopher Columbus embarked on a journey, sponsored by the Spanish monarch, to explore and exploit the riches of the east. Little did the world know then, that that journey was going to change the world of trade. Not only did mankind realize that the world was bigger than they thought then, but it also paved the path for more trade throwing open the possibilities of transportation and logistics. Zillions of ships sailed from Europe to the land Columbus and his fellow sailors discovered, to trade and reap (exploit will be a more apt word) the riches of that land. This period in history can be termed as the ‘era of discovery’. During the same time, there was an exponential increase in the number of ships which set out to transfer men and material in and out of these newly discovered worlds. This encouraged traders and rulers all over the world to invest in improving the infrastructure to smoothen the logistics and transportation of goods. Later during the 15th century, there was a fierce competition between Dutch East India Company and their English counterpart to win territories of trade (and later colonies for their respective queens). It was during this time these companies started to massively employ various logistics tactics for mass mobilization of troops and ammunition to gain the edge. All these have contributed to the evolution of logistics management to the form it is today.

The period of two Great wars!

The 20th century was that time in history when a lot of things happened all over the world, including the two great wars that devastated Europe and East Asia. Amidst this devastation, the trade of Supply Chain Engineering and Logistics was getting established in the world. During world war 1, which was extensively fought by valiant men in trenches, there was intensified construction of railways and road infrastructure to move men and ammunition to the front line. Further, Germany and its allies suffered a great deal through the blockade of their ships carrying supplies making the world realize the importance of logistics for each entity to survive.After the first world war, there was a spike in industrialization in countries like the U.S, Britain, Germany, Japan, etc. Businessmen and academicians started studying Operation Research and Logistics systematically to improve the efficiency of factories and movement of materials. All these came handy during the second world war, especially for the allied forces. The mobilization of men and material for the invasion of Europe by allied forces can be considered as one of the most commendable feats of military logistics to date. Over 2 million men, 1.2 lakhs armored vehicles, 1.7 lakhs of trucks, 6.9 tons of supplies were transported over the English Channel to mainland Europe within days after D-day. During those years of war, military tacticians and strategists employed various techniques of operation research and transportation problems to optimize the logistics cost and to enable timely supply of ammunition and men to the front line.

Coming of Age: Postwar

During the 1960s, businesses worldwide started to keep a track on various transactions electronically providing managers with a great pool of data to base their business strategies on. This had opened the gates for innovations in planning, warehousing and inventory management to maximize the profitability by minimizing the cost of operations and supply chain.Though it can be found that the various disciplines of the supply chain management were employed throughout the history of mankind, it was not until 1982, the term supply chain management was first coined. It was put forward first by Keith Oliver, a consultant who mentioned it during his interview for the Financial Times. During the 1990s managers and industrialists all over the world began to use SCM more often to design strategies and make business decisions. The data collected and stored electronically has become a tool for these strategists to make the right decisions at the right time to optimize the operational cost of a company.

The era of data and technology

With the boom of information technology and computer software, the significance of Supply Chain Management went up. With various data analysis tools like MS Excel, supply chain professionals could visualize various processes graphically and pictorially. By the 1990s Enterprise Resource Planning(ERP) software was rolled out, which significantly helped businesses to plan their operation and various supply chain activity. With ERP, businesses were able to link everything with their financial targets enabling them to maximize the profitability and to control the cash flow. Today, ERP systems of SAP, Oracle, Sage, Microsoft, and NetSuite are the ones which are widely used by companies worldwide.

Dwindling world and the global economy

Today the world is driven by businesses and money is the fuel which drives it. The time when businesses where restricted to a small town, city or even a nation is long gone. With most of the global economies encouraging global trade, it is easy to import/ export products from and to other countries. Businesses have the liberty to choose the place and time to manufacture their products all over the world, solely based on operational cost and profitability. With this freedom to choose its operational centers and factories, the significance of SCM has increased tremendously. Today a supply manager in India has a choice to buy the same product locally, from China, or from Europe depending on the parameter his business demands. With this, the importance of classifying sources in terms of quality, costs, serviceability, and logistics has gone up. Today we have many sophisticated tools to help supply chain professionals to tackle various issues they encounter.

So, as you run through the pages of the history of mankind, you will realize how supply chain management has evolved to the form which it is today. Today there are millions of supply chain analysts and managers worldwide helping various industries to optimize their cost and to increase profitability. Supply chain management principles have been employed on almost every industry including, automotive, FMCG, electrical manufacturing, industrial goods, real estate, etc. So, though SCM is a relatively newer concept in the business world, its history traces back to the day human began to trade and its importance is growing with each passing day!