History and Evolution of Supply Chain Management

• This module discusses the history and evolution of the global supply chain.
• Students will learn where the supply chain starts, who initiates it, its historical context, evolution, and its significance in commodity transportation.

Intended Learning Outcomes:

• Understand the history of supply chain management

• Familiarize with the evolution of supply chain management

• Explain the importance of the supply chain in business

• Understand the role and structure of supply chains

• The global supply chain has undergone significant transformation in the last 100 years.

• Changes have occurred in sourcing, manufacturing, and transporting goods.

• The evolution includes new handling procedures, ocean-going vessels, containerization, and computerization.

• These changes have led to more complex and efficient global supply chains.

Supply Chain History: Before 1900

• Before the Industrial Revolution, supply chains were local and restricted to regions.
• An example of an agrarian supply chain: farmer → mill → baker → market stall
• The Industrial Revolution brought railroads, enabling faster and cheaper transportation over longer distances, but supply chains were limited to countries.
• In the 19th century, rudimentary hand trucks improved goods handling.
• International ocean trade was inefficient due to loose goods being stored in ship hulls, requiring significant labor for loading and unloading.

Supply Chain History: Early 20th Century

• Trucks were developed for faster road transport due to the invention of the internal combustion engine in the late 19th century.
• The first semi-truck was invented at the end of the 19th century.
• Mack Trucks was founded in 1900.
• Diesel engines were introduced in the mid-1920s.
• Early forklift truck concepts were developed in the early 20th century, with further development before 1930.
• In 1925, pallets were introduced in warehouses, allowing goods to be consolidated and stacked vertically, which saved space and improved handling efficiency.

Supply Chain History: 1930s-1940s

• Logistics became crucial during World War II.
• Efficient supply chains were necessary for manufacturing military hardware and supplying troops both at home and abroad.
• The 1940s saw the integration of industrial engineering and operations research into supply chain engineering.
• Pallet handling and storage systems continued to develop to optimize warehouse space.
• The goal was to streamline loading, unloading, consolidation, and handling of goods for faster deliveries and distribution.

Supply Chain History: 1950s

• Containerization involves using specialized intermodal container assets to transport ingredients, raw materials, parts, and finished products.
• The most important feature of shipping containers is that they are intermodal.
• Intermodal means they can be easily transported using different types of transport (truck, railway, container ship).
• Standardization makes transporting and handling containers faster and easier.
• This results in cost and efficiency savings throughout the supply chain.
• Time saved translates to faster transfer of goods, reduced waste and environmental impact, and better margins.
• Shipping containers were invented in the mid-1950s but were not fully standardized until the late 1960s.
• Transportation manufacturers began building vehicles to transport these containers.
• Containerization was a major driver in making global trade cheaper and more efficient.

Benefits of Using Shipping Containers:

• Benefits for SCM, logistics companies, distributors, manufacturers, retailers, and other related organizations.
• Containers are loaded/unloaded using mechanized equipment, cranes, and automated systems, making processes quicker and more efficient than handling irregularly shaped shipments.
• Containers can easily be shipped over long distances via truck, train, or ocean vessel, with minimal time spent transferring between transport types.
• The risk of tampering or theft is reduced because containers can be transferred without being opened.
• The rigid construction of containers protects the goods inside from damage and environmental factors.
• Unique codes and computerized systems are used to track containers, allowing supply chain managers to know the location of specific goods.

Types of Container Units

• Dry storage containers are the most commonly used; they come in standard ISO dimensions and are used for shipping dry materials in 10ft, 20ft, and 40ft sizes.
• Flat rack containers have collapsible sides and can be made into a flat rack for shipping various goods.
• Open top containers have a convertible top that can be removed for shipping materials of any height.
• Tunnel containers have doors on both ends for quick loading and unloading.
• Open side storage containers have doors that can be changed to completely open sides for a wider room for loading materials.
• Double doors containers have double doors for a wider room for loading and unloading materials.
• Refrigerated ISO containers are temperature-regulated for shipping perishable substances.
• Insulated or thermal containers maintain a higher temperature.
• Tanks are used for transporting liquid materials and are made of strong steel or anti-corrosive materials.
• Cargo storage roll containers are foldable and used for transporting sets or stacks of materials.
• Half height containers are made of steel and are half the height of full-sized containers, used for coal, stones, etc.
• Car carriers are used for shipping cars, over long distances.
• Intermediate bulk shift containers are designed to handle and ship large amount of materials
• Drums are circular for bulk transport of liquid materials
• Special purpose containers are custom made.
• Swap bodies are used in Europe and are made with a strong bottom and a convertible top.

Supply Chain History: 1980s-1990s

• Supply chain stakeholders and transportation manufacturers built on previous successes.
• The term “Supply Chain Management” was coined in 1983.
• Personal computing revolutionized the supply chain.
• New software made it easier to track costs and maximize profits.
• Other advancements included air freight optimization, supply chain distribution networks, and the introduction of Enterprise Resource Planning (ERP) systems.
• MIT developed RFID tags to electronically track goods and shipments.
• Microsoft's Internet Explorer 1.0 was released in 1995.
• Communication capabilities fundamentally changed how we think about information sharing.
• Supply chain and logistics planning is still primarily based on distributed models from personal computers.

Definitions

• Every organization delivers products (goods and services) to its customers.
• Products are a complex package containing both goods and services.

Supporting Operations

• Operations are the activities that create and deliver the products.

• Inputs include raw materials, components, people, equipment, information, money, and other resources.

• Operations include manufacturing, serving, transporting, selling, and training.

• Outputs are goods and services.

• Logistics moves materials around the cycle of customers generating demands and operations using resources to make products.

• Logistics moves materials through different parts of an organization, collecting from internal suppliers and delivering to internal customers.

• Logistics is responsible for the flow of materials from suppliers into an organization, through operations, and then out to customers.

Materials

• Materials are all the things that an organization moves to create its products.
• These can be tangible (raw materials) and intangible (information).

The Supply Chain

• Organizations act as customers when buying materials from their suppliers and as suppliers when delivering materials to their own customers.
• A supply chain consists of the series of activities and organizations that materials move through from initial suppliers to final customers.
• Every product has its own unique supply chain, which can be long and complicated.
• Materials may move through raw materials suppliers, manufacturers, finishing operations, logistics centers, warehouses, third-party operators, transport companies, wholesalers, retailers, and other operations.
• The supply chain may extend beyond the final customer to include recycling and re-use of materials.

Structure of the Supply Chain

• The simplest view is a single product moving through a series of organizations.
• Activities in front of an organization (moving materials inwards) are called upstream.
• Activities after the organization (moving materials outwards) are called downstream.
• Upstream activities are divided into tiers of suppliers.
  • First tier supplier: sends materials directly to the operations
  • Second tier supplier: sends materials to a first tier supplier
  • Third tier supplier: sends materials to a second tier supplier
• Customers are also divided into tiers.
  • First tier customer: gets a product directly from the operations
  • Second tier customer: gets a product from a first tier customer
  • Third tier customer: gets a product from a second tier customer
• Most organizations get materials from different suppliers and sell products to different customers.
• The supply chain converges as raw materials move in through tiers of suppliers and diverges as products move out through tiers of customers.

Benefits of Supply Chains

• Supply chains allow operations to be located away from customers or material sources.
• They allow for mismatches between supply and demand.
• Supply chains can simplify movements; for example, a central wholesaler can reduce delivery routes.

Other Benefits of Well-Designed Supply Chains

• Producers can locate operations in the best locations.
• Producers can achieve economies of scale by concentrating operations in large facilities.
• Producers do not need to keep large stocks of finished goods.
• Wholesalers place large orders, and producers pass on lower unit costs in price discounts.
• Wholesalers keep stocks from many suppliers, giving retailers a choice.
• Wholesalers are near to retailers and have short lead times.
• Retailers carry less stock because wholesalers provide reliable deliveries.
• Retailers can have small operations, giving a responsive service
• Transport is simpler, with fewer, larger deliveries reducing costs.
• Organizations can develop expertise in specific operation types.

Activities of Logistics

• Logistics is responsible for the movement and storage of materials as they move through the supply chain.

Activities:

• Procurement/Purchasing: Finds suitable suppliers, negotiates terms, organizes delivery, arranges insurance and payment.
• Inward Transport/Traffic: Moves materials from suppliers to the organization's receiving area, chooses transport type, finds the best operator, designs a route, and ensures safety and legal requirements are met.
• Receiving: Ensures materials delivered correspond to the order, acknowledges receipt, unloads vehicles, inspects materials for damage, and sorts them.
• Warehousing/Stores: Moves materials into storage, takes care of them until needed, and ensures they have the right conditions, treatment, and packaging.
• Stock Control: Sets policies for inventory, considering materials to store, overall investment, customer service, stock levels, order sizes, and order timing.
• Order Picking: Finds and removes materials from stores.
• Materials Handling: Moves materials through the operations within an organization.
• Outward Transport: Delivers materials from the departure area to customers.
• Physical Distribution Management: Delivers finished goods to customers, including outward transport, and forms an important link with downstream activities.
• Recycling, Returns & Waste Disposal: Manages problems with delivered materials.
• Location: Logistics has to find the best locations for activities.
• Communication: Links all parts of the supply chain, passing information about products, customer demand, materials, timing, and costs.