Essay on Historical Analysis of Supply Chain Management
Prepare an essay addressing the below topic:
“Although a contemporary phrase, supply chain management has a rich history. Provide a brief historical analysis of supply chain management.”
Supply Chain Management (SCM), being a contemporary phrase, has a rich history because the concept of SCM can be traced back to the 20th century where this concept was first introduced. The concept of SCM was introduced so the manufacturers could increase their sales and revenues in the market and gain a competitive advantage. The primary objective of this essay is to analyze the history of SCM and evaluate how this contemporary concept was relevant in the past and the present scenario. The essay will discuss the origin of the SCM concept to gain a proper historical insight for the analysis. Furthermore, the essay will focus on the discussion of how the concept of SCM has developed through the ages and what changes have been made in this concept. Along with that, the essay will also discuss the uses of SCM and its relevance in the past and as well as in the present context.
A supply chain is a universal concept, and it is concerned with the network between an organization and its suppliers of materials used to produce final products. An organization's supply chain involves the development of the product, marking of the product, its distribution, and financing and consumer service(Zailan, 2015). In a supply chain, there are a series of steps that need to be taken by an organization to acquire raw materials from the supplier or deliver finished goods to the consumers. These steps are present so that raw materials can be moved and transformed into finished goods. The process also involves transportation and distribution of finished goods for consumption so that consumer experience can increase.
Along with that, the supply chain also includes warehousing and storing of inventories.Since the past decades, the supply chain process has become increasingly complex due to the fast-changing market environment. When the concept of the supply chain process was first introduced in the 20th century, there was no integration of technology. However, with the advancement of time and development in the business environment, there has been an integration of AI technology in the supply chain process of companies. This has significantly changed the supply chain scenario worldwide, and the introduction of globalization also has a significant contribution.
Origin of Supply Chain Management
Supply Chain Management (SCM) origination can be traced back to 1982 where Keith Oliver coined this word for the first time(Berthold, 2019). Though the term was introduced in 1982, the concept of SCM was necessary since the early 20Th century. The concept of SCM was originated due to the presence of logistics and intensive use of laborersfor handling and moving material from one place to another. This process also involved warehousing and storing of goods between the export and receiving time. Before the SCM concept, transportation was popular, but this concept only dealt with moving materials from one place to another. Still, it did not cover the storing of the material. This concept was viewed to be incomplete because when a company is supplying the goods, they need to consider the storing and warehousing of the material in a proper condition so that the materials are not damaged. If the materials are damaged, then the seller will suffer considerable losses as their sales will be reduced because of the return of damaged material. This made the introduction of the SCM concept important so that sellers and suppliers could focus on the over process of supplying the goods, which involved warehousing, inventory management, and shipping and transportation of goods. Therefore, the concept of SCM was introduced to allow the suppliers and sellers to manage the supply process and improve their sales and revenue. By the 1980s, most of the manufacturers owned their own factories where they produced their goods and services that were sold to the ultimate consumers.
The transparency of the works carried out in the factories was made compulsory so the investors and stakeholders could see the works being carried out and make their investment decisions. This made it essential for the manufactures to implement a robust management system that allowed them to control their overall supply process. This involved the manufacturers making management strategies for receiving raw materials and how they will supply the finished goods to retailers or the ultimate consumers. This is because the control over the supply chain determines the sales and revenue of the manufacturers, and the stakeholders and investors made investments based on the profit and income of the manufacturers. In order to respond to these challenges of the sellers, ,manufacturers and suppliers, Keith Oliver, who was a logistician and a consultant, developed the concept of SCM that could beused by any sellers, ,manufacturers, and suppliers in the market. The concept was introduced with the vision of enhancing the marketing, manufacturing, sales, finance, and distribution process of a company(Lu and Swaminathan, 2015). Keith Oliver stated that supply chain management was a process that allowed the suppliers to plan, implement and control the overall process of the supply chain and ensure that all the materials reach the destination safely without being damaged. Therefore, all these needs and requirements of the sellers' manufacturers and suppliers in the market gave rise to the origination of the concept of supply management.
Development of Supply Chain Management
Since the origination, the concept of SCM has developed significantly, and there have been several reviews and changes in the concept as per the need to the market situation. The development of SCM can be analyzed through three stages, the creation, integration and globalization era. In the creation era, the concept was first introduced due to the changing market condition and the changing needs of the sellers, manufactures, and suppliers. In the creation era, SCM was used by the companies that needed to implement large-scale changes, restructuring, re-engineering, or downsizing. This helped the companies to perform cost reduction efficiently and increase their profit because, in the creation era, the main motive of doing business was profit creation. With the sole motive of earning and generating profit, the supplier implements SCM in their organizations that helped them improve their efficiency and supply goods of good quality, and damage during transit(Mehmeti, 2016). This era is considered the origination era of the SCM concept, and this era was the time period in the 80s. With the help of SCM, the suppliers could also manage their raw material, work in progress, and movement of the finished or semi-finished good.
The second era was the integration era, and this era was when technology development was at its peak, and there was an integration of supply chain and technology. This era started in the 90s, and this era was marked with the integration of electronic data interchange (EDI) with the company's supply chain. There was continuousdevelopment in the SCM in this era, and this continues till the 21st century.The primary characteristic of SCM in this era was an increase in value-added products and services and reducing the cost with the help of technology. In this era, the SCM was developed in three stages, and the first stage was focused on the primary activities such as producing, storing, distributing, and controlling(Johnson and Stevens, 2016). In the second stage, the suppliers focused on the use of ERP software so that proper planning can be done. The third stage focused on the concept of vertical integration that connected the supplier with the consumers of their product.
The third era of SCM development is the Globalization era, and this was introduced when the concept of globalization was adopted by a majority of countries in the world. With the introduction of globalization, the suppliers were able to supply their products and materials internationally, complying with international trade laws (Vidrova, 2020). In this era, the suppliers focused and attention to the global system and expansion of supply relations beyond the geographical border of the suppliers. This era helped the suppliers to expand their business into foreign countries by supplying their material to different countries in the world.However, in this era, the SCM process became more complex than in the previous two eras. This gave rise to professionalism in the field of SCM that was needed to be adopted by the companies involved in international trade.
Historical analysis of the uses of supply chain management
Supply chain management can be said as the backbone of any small, medium, and extensive company in any industry because the usability and contribution of supply chain management in all the standards of the business are crucial for the economic growth and success of the company. Though supply chain management has been in the industry since form the very early eras, the term was coined after 1980 to realize the significant uses of supply chain management in the industry. Since from the initial period, the ancient emperors mark a logistic development in the field of introducing roads, organization of labor, transportation, and supply of raw materials, and in order to perform all these activities, a massive effort of the organization was required, and hence the supply chain management was recognized in the industry as one of the essential factors. Supply chain management is generally for the optimization and management of the systems of the industry and organizations, including the process of getting materials to the delivery of the final products. As per the supply chain management council professionals, supply chain management is used to maximize customer value while running the company with profitability. Hence, with the innovation in the technologies, there was an immense impact on the supply chain management of the industries in both the global as well as national standards. Also, with the implications of various advanced technologies, several issues in the aspects of the supply chain management were solved easily, such as the uses of algorithms, optimization models, etc., through which the logistic problems of supply chain management can be predicted. Over the course of history, the use of supply chain management was to fulfill the diverse need of all the stakeholders while exploiting the natural resources to enable the industry into profitable business outcomes (MacCarthy et al., 2016). With the industrial revolution, the industries are focusing on reshaping their business strategy to stem entirely over the integrated boundaries while being transparent in their supply chain management, which has now become one of the most determining factors for the success of the industry. The end-to-end connectivity in the supply chain management, brought by the transformation of digitalization, is used to place the industry in the competitive advantage and meet the customer's changing needs and demands more efficiently (Seyedghorban et al., 2019). Both in the past and the contemporary days, supply chain management is used by the industries for the creation of efficiencies, profit maximization, lowering the costs while boosting the collaboration of the industry in the competitive market. Depending upon the size of the industry and the products manufactured by the industry, supply chain management can be both simple and complex. Large industries use various ERP software systems in their supply chain management, which will help the industry manage the industry's operations efficiently and effectively while consistently allowing the industry to run profitably.
Relevance of Supply Chain Management
The historical analysis of SCM and its uses can be evaluated to analyze the relevance of the concept of SCM.The relevance of SCM is significant in the present business scenario because all the suppliers need SCM in their everyday transactions. Along with that, the implementation of SCM helps the suppliers maximize the consumer value and achieve a sustainable competitive advantage. This is because maximization and sustainability help the suppliers to stay in the market for a longer time.In modern times, the SCM deals with integrating and aligning the supply process that will allow them to gain and increase their economic value and at the same time compete in the market. With a better and enhanced SCM, a company can do better business in the market as it improves consumer service(Sakthivel and Muralidharan, 2019). With SCM, a company can supply the right products in the appropriate amount to the consumers. This means the SCM helps the seller supply such a quantity of products that are neither less nor more so that smooth sale can be ensured. If the suppliers cannot supply the correct quantity, there can be a shortage of oversupply of products that will directly affect the price and sales of the product. If the supplier supplies a lower quantity, then there will be higher demand and lower supply that will increase the price of the product. If there is oversupply, then the demand for the product will be lower than the supply, which will result in a decrease in the price.
These fluctuations in the market directly affect the company's cost and revenue, which makes SCM a relevant concept in the market(Alfarsi, Lemke, and Yang, 2019). If the suppliers can implement a proper SCM in their supply chain process, they can reduce their operating costs by reducing their cost of purchase and cost of production. When there is proper SCM, then the companies can acquire raw material quickly and at a lower cost.The SCM helped the organizations to identify distributors who give quick deliveries so that the organizations could avoid using expensive inventory storage. This, in turn, helped the organizations to decrease the cost of production because when the suppliers are reliable, there are no chances of risks occurring in the purchasing of raw material. Further relevance of SCM is justified by streamlining the process of securing the flow of product from any mishaps or uncertainty, such as natural calamities. When an organization implements SCM, it can locate and identify the possible risks and interruptions in its supply process to make proper plans beforehand to eliminate those risks and execute a smooth supply. There is high importance of SCM in maintaining a robust supply chain process. It also helps the organizations efficiently move the materials or products to their destination.
In conclusion, it can be said that that the essay gives an in-depth historical analysis of the concept of SCM. Though SCM is considered to be a modern-day concept, itsorigination can be traced back to the 20th century. The first person to coin the name was Keith Oliver in the year 1982, and since then, the concept has continued to develop over time. The overall analysis shows that SCM has a rich history, and its historical development can be analyzed in three eras. The three eras of development are the creation era, integration era, and globalization era; there has been a significant development in each era. The uses of SCM have also been analyzed in the past decades, and the analysis of these users has supported the evaluation of the relevance of SCM in the past and present business environment. Therefore, despite being a contemporary phrase, SCM has a rich history that has been analyzed in this essay. ?
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