Four Decades of Supply Chain Management

Stephen DeAngelis

November 2, 2021

Nearly a decade ago, I wrote a post entitled “Thirty Years of Supply Chain Management,” which examined the first in a series of articles written by Kinaxis analysts looking back over the previous thirty years of supply chain management. In that article, Kinaxis professional services consultant Ray Karaffa noted, “2012 marks the 30th anniversary of the term ‘Supply Chain Management.’ Keith Oliver, as a consultant with Booz Allen Hamilton, coined the term in 1982.”[1] He added:

 

[Oliver] defined the concept as follows: ‘Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.’ SCM as defined by Keith Oliver could be construed as Macro Supply Chain Management (Macro-SCM), since it involves the global network processes from the initial raw materials to the ultimate consumption of the finished product linking across supplier-user companies. These functions lie within and outside a company that enable the value chain to make products and provide services to a customer. Micro Supply Chain Management (Micro-SCM) could then be construed as the non-global activities concerned with planning and controlling the rates of purchasing, production, distribution and related capacity resources to achieve targeted customer service levels within a company. This could be a replacement for the old term of Production and Inventory Management since it is now included within the broad definition of SCM.”

 

Nearly ten years on, what, if anything, has changed?

 

The Greatest Advancements in Supply Chain Management

 

In my earlier post, I noted, Karaffa admits that supply chain management existed long before the term was coined. He states, “Supply chain management concepts have been in practice since the turn of the last century.” He probably misses the mark by several thousand years. Most of the great civilizations of the past became great because they mastered the art of trading. Even small countries like the Netherlands were able to punch above their weight on the world stage because they were masters of trade. I venture to say that the suppliers and merchants of past ages were no less concerned about managing supply lines than are today’s professionals.

 

In another article in the Kinaxis series, Trevor Miles (@milesahead), Kinaxis’ Vice President for Thought Leadership, was asked to select the three greatest advancements in supply chain management. In that article, he admits trying to choose the three greatest advancements was daunting — even when limited to the previous 30 years. “I turn quickly into ‘a deer in the headlights’,” he wrote. “Paralyzed more by choice than by fear in this case. But I guess I am really paralyzed by the fear of making the wrong choice given the wide range of choice. How does one choose just three from a long list, and aren’t many of them interlinked?”[2] In the end, Miles decided to go big. “There were so many items on my list,” he wrote, “but I had to come up with three, and I chose the definition of the term supply chain management, followed by technology to support the sub-processes, and the emergence of people in the executive suite who understand the importance of the supply chain to the financial performance of the company.”

 

Excellence in any business requires leadership to focus on people, processes, and technology. In a macro-sense, that’s exactly what Miles did (although he lumped technologies and processes together). So many technologies have been introduced over the past forty years that most experts now agree we are at the beginning of the fourth industrial revolution (aka Industry 4.0). Ten years ago, John Westerveld (@johnwesterveld), a Kinaxis Global Alliances, Partner Enablement Consultant, was asked to discuss how technology had changed supply chain management. His first thought was that people should be addressed before technology. He wrote, “Dustin Mattison observed that ‘Technology has only changed supply chain management in so far as our mindsets and organizational cultures have changed,’ arguing that, in fact, people and mindsets lead organizational change, and the technology needs to keep up.”[3]

 

When Westerveld did turn to technology, he first mentioned the importance of personal computers and the Internet. He insisted, “[These technologies] empowered buyers to gain access to a plethora of goods and services from around the world. The interesting side effect is that it drove competition into markets that didn’t realize they were competing. This global competition drove costs and prices down and drove a new growth industry — global logistics.” He next noted the advancements in warehouse management systems and radio frequency technology. He also addressed the subject of web services. He wrote, “More advanced companies use web services to enable system to system communication such that your suppliers are aware of changes almost at the same time you are. Collaboration is also enhanced via the internet. Video conferencing, instant messaging, sharing pictures over mobile devices all means that ideas and concepts can be shared around the world without the need to travel.” Little did he know how valuable those services would become during the pandemic.

 

Ten years on Westerveld might have spent some time talking about the Internet of Things, cloud computing, artificial intelligence, and, perhaps, blockchain technology. What would be on your list of the greatest advancements over the last decade?

 

Top Supply Chain Worries

 

Another article in the Kinaxis series was written by Carol McIntosh, a Business Consultant with Zinata. She was asked to identify the top ten worries supply chain managers had in 2012 that they didn’t have in 1982 and vice versa.[4] Most of the items she listed as worries in 1982 that weren’t as great of a concern in 2012 had to do with paperwork. Computers had largely eliminated many of the problems she identified. Below is her top ten list of supply chain worries in 2012:

 

1. How can you support your organization with visibility and planning intelligence across your global footprint?
2. How do you maintain some level of control of your distributed and outsourced supply chain?
3. What more can you do to reduce latency across processes and increase your responsiveness?
4. How can you know sooner and capitalize on market events that drive increased market share penetration?
5. How are you going to differentiate yourself from your competition knowing that brand loyalty is a thing of the past?
6. How do you improve customer service and reduce costs at the same time?
7. How do you take processes like S&OP and modernize them to be more integrated and collaborative?
8. How do you involve your partners in a more collaborative and win/win business model?
9. How do you move from a silo approach to supply chain planning to an integrated end to end supply chain approach?
10. Do you have the right skills in your supply chain organization to effectively execute to a new vision?

 

Many of those worries still plague supply chain managers. Nowadays you can add climate change, geopolitics, and pandemics to the list of worries. These new worries have helped throw today’s supply chain into disarray — many critics are even calling it broken. The state of today’s supply chain raises two questions: What would you add to the list of worries? Can supply chain management fix today’s supply chain challenges?

 

Concluding Thoughts

 

As part of the Kinaxis series, Kirk Munroe (@kirkmunroe), a Principal Consultant at Paint with Data, was asked what he would call supply chain management if he had the power to change it. His answer, “If I could change SCM, I would call it SCE … Supply Chain Excellence (or Effectiveness — either work for me).”[5] Today, his answer might have changed “supply chain” to “value chain,” which better describes a network of activity rather than a linear process. As noted above, the world desperately needs both supply chain excellence and supply chain effectiveness. It took years to get us in the current mess and may take years to get us out of it. World-class supply chain management is essential as we move forward. This simple exercise in reflection made me realize just how much supply chain management has changed over the past decade — and convinced me it’s going to continue to change at a dizzying pace over the next decade as well. It will be interesting to see what people write about when supply chain reaches the ripe old age of 50.

 

Footnotes
[1] Ray Karaffa, “SCM30: What Can We Learn From Supply Chain Management Mistakes?” Kinaxis Blog, 23 March 2012.
[2] Trevor Miles, “SCM30: What Are the 3 Greatest Advancements in Supply Chain Management?” Kinaxis Blog, 6 April 2012.
[3] John Westerveld, “SCM30: How Has Technology Changed Supply Chain Management Today?” Kinaxis Blog, 4 May 2012.
[4] Carol McIntosh, “SCM30: Top 10 Supply Chain Worries,” Kinaxis Blog, 8 June 2012.
[5] Kirk Munroe, “SCM30: If I could change SCM, I would call it…” Kinaxis Blog, 20 April 2012.