Evolution of Supply Chain Management and Logistics

History & Evolution of Supply Chain & Logistics
25 Mar

In the current era, it is clear that new modes of production are concomitant with new modes of distribution, which advances the field of logistics, the science of physical distribution or even supply chain management. Although logistics represents a whole system of space/time interdependencies, we believe that the discussion of its history and chronological evolution of supply chain still requires extensive studies to explore its origin and its advance in time, from a new point of view.

Logistics was first applied and recognised in military operations, its most significant impact is felt through the functions of production, distribution and consumption (Rodrigue and Slack, 2002). It became a large-scale activity during the industrial revolution. The origins of the modern distribution sector dates back to the emergence of the capitalist economy, the development of specific modes of industrial production and the deployment of a particular division of labor. This creates a distinct “sphere of circulation” between production and consumption (Marx, 1939/1953). To a certain extent, circulation enabled the transition from use value to exchange value, and thus made possible the large-scale capitalization of commodities. Retailing and marketing have become part of modern management practice (Chandler, 1977) and have been important factors in the wealth generation.

Consequently, and following this introduction, it is clear that the two functions have a history, it is undoubtedly what we will emphasize on the platform of this blog.

Reminder of Key Definitions – Logistics & Supply Chain Management

 

Logistics has been, is and always will continue to be one of the most controversial military subjects. Besides, it is obvious that there is absolutely nothing wrong with controversy when it leads to better understanding, better organization or better operations (Hesse, M. and J-P Rodrigue (2004)). With regard to military logistics, however, these goals eluded us time and time again because very few of us seemed to be talking about the same thing. If we were to compare all available definitions of logistics, we would recognize that logistics is a function of warfare, that it has a social and economic purpose, that it is a function of organization, and that most of these definitions say the same things even though they differ widely in detail (Graham W. Rider (1970)).

What is Logistics and Supply Chain Management?

 

« Logistics typically refers to activities that occur within the boundaries of a single organization and Supply Chain refers to networks of companies that work together and coordinate their actions to deliver a product to market. Also, traditional logistics focuses its attention on activities such as procurement, distribution, maintenance, and inventory management. » Hugo, M. (2003).

In one of the old article of SCMDOJO “ What is Supply Chain Management ? A Technical and Academic Definition”, we have presented quite a few academic definition of SCMDOJO, and one presented by Donald J. Bowersox, David J. Closs (1996) is:

 

Supply Chain Management is defined as a channel construct as the structure of inter-company units and extra-company agents and dealers, wholesale and retail, through which a commodity, product, or service is marketed”

Supply Chain Management Graphic

And I would use this definition of What is Supply Chain explained for Kids by 10 year old Sareen, which has received quite a widespread praise from some seasoned supply chain professionals.

Supply Chain KPI Dashboard

Thus, in view of this old definitions, Logistics and Supply Chain Management have undergone significant changes over the past six decades in many studies by different authors, a variety of industries.

The 20th century announces a new science, that of the preparation of war: like the other sciences, its elements are not new; they have been doing a quasi-science for a hundred years or more, but it is only now that the immense importance of their unification – one could almost say their imperialization – is becoming a reality.

To briefly indicate its place, it should be remembered that war involves three divisions of labor: Strategy, Tactics and Logistics. The first is the planning service; the second objective execution; the third the commercial department (George C. Thorpe (1916)).

If we try to define the term “logistics”. A Google search for logistics will yield approximately 53 million results (R. Neil Southern, 2011). A more precise definition can be found in the dictionary, which states that logistics derives from the Greek word logistike-, “the art of calculating“, and from logos, which means “reason” (Merriam-Webster Online Dictionary 2010).

The Chronological Evolution of the Concepts – Logistics & Supply Chain Management

 

It should be known that the concepts of logistics and the supply chain have evolved over the last half century or so. In an attempt to be logistically correct, research and studies have followed a specific ranking that is listed in chronological order by decade. But, first, an important disclaimer: this perspective is just that. It does not include all or even necessarily the most important logistical historical facts. It includes, however, those that were important in the eyes of some authors, were from the 1950s to the present day (R. Neil Southern, 2011).

History of Logistics & Supply Chain Concepts

Figure 1 : The Chronological Evolution of Logistics & Supply Chain Concepts

The first form of the chronological evolution of the concepts of logistics and the supply chain implies the existence of 7 distinct and important phases as shown in Figure 1.

  • The First: The Transportation Era (1950s)
  • The Second: The Physical Distribution (1960s)
  • The Third: Physical Supply, Deregulation and Logistics (1970s)
  • The Fourth: Transportation, Deregulation, Physical Distribution and Business Logistics (1980s)
  • The Fifth: Business Logistics (1990s)
  • The Sixth: Logistics and Supply Chain Management (2000s)
  • The Seventh: Supply Chain Digitalization (2010’s)

The 1950s – The Transportation Era

 

In the 1950s, transportation was in focus. Several universities offered courses in the field of transportation. However, topics such as logistics, logistics, physical sourcing and supply chain management are not included in these courses. There were no computers or even pocket calculators back then that could help quantify data (R. Neil Southern, 2011). There is also not much discussion (if any) about the systems approach or the concept of total cost. The idea of ​​working with suppliers or customers was not a priority for most managers at the time. The term logistics is mainly used in the military field. In times of war, having the right supplies in the right place at the right time is critical.

The main player in the 1950s was the federal government. For example, the most significant event related to logistics (or transportation) was the Federal Aid Highway Act of 1956, which authorized the National Interstate Highway and Defense Highway System. The Interstate Commerce Commission (ICC) (founded in 1887) is the economic regulator of road and rail transportation. All road and rail freight duties and regulations regarding the entry of road carriers are under the jurisdiction of the International Chamber of Commerce. The ICC also regulates the closure of railway lines. In the 1950s, several agencies were available for transporting students and practitioners. Many companies encourage their transportation professionals to pass the ICC Practitioner exam administered by the ICC Practitioners Association (now the Transportation Practitioners Association 1984, the Transportation Law, Logistics and Policy Association 1994).

The 1960s – Physical Distribution

 

The study of transportation in the 1960s evolved into the study of logistics, and to a lesser extent, logistics. The National Council of Physical Distribution Management (NCPDM) was established in 1963 to represent professional logistics managers. This organization was renamed the Council of Logistics Management (CLM) in 1985 and the Council of Supply Chain Management Professionals (CSCMP) in 2004. Today, CSCMP has more than 14,000 members. In most cases, logistics (outbound logistics) and physical supply (inbound logistics) are seen as two distinct functions. This was reflected in the two major organizations of the time. Founded in 1963, NCPDM represents the outbound side of logistics and the National Association for Purchasing Management (NAPM) represents the inbound side. NAPM published a new magazine, Purchasing Magazine, in 1965. In the 1960s, there were some prominent textbook authors and authors of academic and professional journals. During this decade, one of the first textbooks to focus on logistics distribution and logistics was Logistics Management: Logistics Problems in the Enterprise (Smykay, Bowersox, and Mossman 1961)(R. Neil Southern, 2011).

While logistics received a lot of attention in literature in the 1960s, with transportation as the most important function of logistics. In the fall of 1961, the American Transportation Association published its first issue of Transportation Magazine. In 1966, President Lyndon B. Johnson signed Public Law 89–670 establishing the Department of Transportation, and Alan S. Boyd was elected the nation’s first Secretary of Transportation.

The 1970s – Physical Supply, Deregulation and Logistics

 

In the early 1970s, the physical supply (or sometimes referred to as material management) of the input side of the logistics system was taken over. Later in the century, there was a movement to combine physical distribution with physical delivery, with an emphasis on broader logistics concept. The 1970s were a pivotal decade for the further development of the logistics concept. Universities, scholarly journals and textbooks, and professional organizations all contributed to making the decade productive (R. Neil Southern, 2011).

Transportation is also further emphasized as the most important function in logistics management. During the period of the 1970s, the Transportation Journal emerged as one of the leading academic journals in the discipline of transportation and logistics. This is because the latter has published a set of articles in the fields of economics, industrial management and carriers, physical distribution, logistics, regulation, public policy, education and communication. other relevant topics in particular. Another logistics-related academic journal that was introduced in 1978 is the Journal of Business Logistics (JBL), which was published by the NCPDM and is known today as one of the leading academic journals. JBL’s production took place at The Ohio State University. Professor Bernard “Bud” LaLonde was JBL’s first editor (Miyazaki, Anthony D. and al. (1999)).

The 1980s – Transportation Deregulation, Physical Distribution and Business Logistics

 

During the 1980s, and specifically in the world of transport, deregulation continued with the Motor Carrier Act of 1980, which reduced regulation of road freight rates and entry conditions. The Staggers Rail Act of 1980 allowed the railways to negotiate contracts and operate with less oversight by the ICC.

Indeed, the CAB ceased operations in 1984, and in 1987 the federal government sold its common stock in Conrail. Federal deregulation of transportation in the United States has resulted in a more competitive and flexible system (R. Neil Southern, 2011).

The term physical distribution began to be phased out during the 1980s, and the term logistics came to the fore. For example, James C. Johnson and Donald F. Wood changed the name of their textbook Contemporary Physical Distribution to Contemporary Physical Distribution and Logistics. The NCPDM changed its name to the Council of Logistics Management (CLM) in 1985.

 

The 1990s – Business Logistics

 

During the period of the 1990s, business logistics continued to be a very essential element. Most cost-focused companies have realized that there are opportunities for cost savings through negotiations with carriers and the implementation of the systems approach and total cost concept. Johnson and Wood, in their fourth edition of their textbook, dropped Physical Distribution from the title, to simply become Contemporary Logistics. Many transport companies have exploited the concept of logistics, using it from a theoretical angle, promoting the idea that they were not only transport companies, that they were logistics carriers, or they provided logistical solutions (R. Neil Southern, 2011).

During the 1990s, the main factors affecting logistics was the rapid development in electronics and communication technologies, such as the Internet and electronic data interchange. The growth of third-party logistics organizations, strategic alliances and partnerships has also been significant. Companies have started to see logistics as an integral part of overall business strategy.

The 2000s – Logistics and Supply Chain Management

 

The early years of the 21st century have seen a slow evolution from logistics to supply chain management in academia and business. As part of the business world, small and medium enterprises have been slower to accept the supply chain concept.

Supply chain management has therefore come to be seen as a chain that encompasses the planning and management of all activities involved in sourcing and converting and all logistics management activities. The Transport and Logistics Basics textbook states: “The supply chain includes all partners in the logistics process. The idea is to have integrated information sharing between all trading partners (suppliers, manufacturers and customers)”.

This assessment of logistics and supply chain management over the past few years would not be complete without a mention of development through online and distance education in logistics and supply chain management. It would be rare to find a college or university that didn’t have some sort of online presence. Distance learning is an important part of teaching logistics. The Logistics Management Institute claims to be the oldest logistics distance learning school in the world (R. Neil Southern, 2011).

 

The 2010 – present – The Era of Supply Chain Digitalization 

 

The digitalization of the Supply Chain corresponds to the dematerialization of information processing. This digitalization offers better management of data flows as well as unparalleled reliability of information related to the Supply Chain. For optimal production flow management, the digitalization of flows (physical logistics flow or logistics just-in-time) is therefore essential.

Nowadays, different types of businesses find themselves faced to an increased and globalized competition. In order to remain competitive, the digitization of the supply chain has become necessary. The benefits of the digital of supply chains are no longer debated.

 

What is Supply Chain Digitalization ?

 

In their article « Digital Supply Chain: Literature review and a proposed framework for future research », Buyukozkan and Gocer have defined Digital Supply chain as a:

“Smart, value-driven, efficient process to generate new forms of revenue and business value for organizations and to leverage new approaches with novel technological and analytical methods”.

Digitizing the supply chain appears to be the most effective way to achieve the objective of a company with remarkable results.

The entire business cycle of an industrial company (sales forecast, supply, production, storage, shipping, after-sales service, etc.) should imperatively be digitized in the current era

Supply Chain Digitalization : Today Vs. Tomorrow

Supply Chain Digitization - Today vs Tomorrow

 

As the century unfolds, we are seeing a more joined up supply chain, with efficient, robust and technologically advanced systems integration.

Not only will efficiency remain at the heart of the supply chain, but with digitalization enabling high levels of connectivity, we’ll see greater transparency and collaboration across different departments as shown in picture above.

The advantages of digitalization are numerous including reliability, product and information traceability, automation (automatic synchronization = information flows and physical flows for example), and collection of forecast information for management, in particular sales forecasting, and inventory management according to demand using our sales forecasting software. Ultimately, supply chains that go digital are able to reduce their operating costs by 20% on average.


Inventory optimization Tool
One of the most important tips to take into consideration is to remember to include a successful digital approach in the company’s strategy: the transition to the supply chain 4.0 must be a real desire and the human and financial resources must be adapted so that all the players of the company adhere to this new organization and best adapt to the changes implemented.

The management of digital production flows brings great agility to the entire supply chain, from end to end. This agility will bring more responsiveness to disruptions in the chain and therefore improve customer service in real time thanks to better anticipation of their needs and better respected delivery times.

To end this article we have adopted Hesse & Rodrigue (2004) to show the New of Supply Chan Digitalization from 2010 to now which requires know-how of emerging technologies, change management and digital competencies which all supply chain professional now need to acquire to be successful and learn to implement 8 C’s of How to Make Your Supply Chain Digital

 

Evolution of Logistics & SCM 1960 - Until Now

Figure 2 : Evolution of Logistics & Supply Chain Management (1960 – Until Now)

Adopted from Hesse & Rodrigue 2004

In Summary of this article of Evolution of Supply Chain Management

 

After recalling the key definitions of the concepts of logistics and supply chain management, in a second step, it proved necessary to present in a clear form the chronological evolution of the two concepts.

 

The description and interpretation of the chronological cycle represented in detail the 6 phases: The Transportation Era (1950s), the Physical Distribution (1960s), the Physical Supply, Deregulation and Logistics (1970s), Transportation, Deregulation, Physical Distribution and Business Logistics (1980s), Business Logistics (1990s), Logistics and Supply Chain Management (2000s) (R. Neil Southern, 2011) and now Supply Chain Digitalization (2010s)

 

In addition to these elements, it was important to recognize that each phase and era, at the end of this evolution, gave rise to mechanisms and notions that gradually became part of the temporal aspect, in a digitization logic.

 

The evolution of supply chain management and the rise of the logistics industry have four main characteristics (Hesse, M. and J-P Rodrigue (2004):

 

  • First, fundamentally restructure commodity trade by developing integrated supply chains with integrated freight needs.
  • Second, while transportation has traditionally been seen as a way to travel through space, logistics is time-sensitive. This is achieved by moving to vertical integration, i.e. subcontracting and outsourcing, including the logistics function itself.
  • Third, according to the macroeconomic structure change dominates demand-driven activities. Whereas traditional supply is primarily driven by the supply side, current supply chains are increasingly demand-driven.
  • Fourth, logistics services have become so complex and time-sensitive that many companies now outsource some of their supply chain management to external logistics providers. These suppliers benefit from economies of scale and scope by providing integrated solutions to many freight distribution problems.
  • Fifth, The rapid growth of technology has led to advances in the supply chain and, in particular, the digital supply chain. As the century unfolds, we are seeing a more joined up supply chain, with efficient, robust and technologically advanced systems integration.

 

It is perhaps essential to remember that logistics within supply chain management is constantly evolving to meet consumer demands. Consumers frequently order products using iPods, iPhones, smartphones and tablets and expect to receive their product within 24 to 48 hours. In order to meet these expectations, companies need to improve their supply chain logistics with the goal of expediting order fulfillment and shipping the item quickly via the most reliable, yet cost-effective means. Yet remaining profitable and fast. When companies create a plan that outlines supply chain logistics, every component and element of that logistics model stays focused, reduces costs, and moves quickly and with significant efficiency, resulting in an ever-increasing customer satisfaction.

After detailing the history of the concepts and the presentation of each period that characterizes the logistics process, let us recall in particular the role and importance of logistics in the management of the supply chain and evolution of Supply Chain over the decades.

As you can imagine, trying to conceive the logistics process in your mind, supply chain management and logistics are considered to be two inseparable concepts that reduce overall business costs in order to produce goods and services and to improve the overall impression of the level of service for your target audience. Choosing the right software also plays a crucial role in optimizing logistics tasks. After all, automation is leading the progress of industrial enterprises today.

Let us know if we have missed some important event of history which could add to this text of Evolution of Supply Chain.

References used in writing Evolution of Supply Chain

[1]R. Neil Southern. (2011), “Historical Perspective of the Logistics and Supply Chain Management Discipline”, Transportation Journal, Vol. 50, No. 1, pp. 53-64, Penn State University Press.

[2]Hesse, M. and J-P Rodrigue (2004), “The Transport Geography of Logistics and Freight Distribution”, Journal of Transport Geography, Vol. 12, No. 3, pp. 171-184.

[3]Rodrigue, J.-P., Slack, B. (2002) “Logistics and National Security. In: Majumdar, S.K. (Ed.), Science, Technology, and National Security”, Pennsylvania Academy of Science Press.

[4]Miyazaki, Anthony D. and al. (1999), “Twenty Years of JBL: An Analysis of Published Research.” Journal of Business Logistics 20 (2): 1– 20.

[5]Donald J. Bowersox, David J. Closs (1996), “Logistical Management: The Integrated Supply Chain Process”, Marketing Series, McGraw-Hill series in marketing.

[6]Chandler, A. (1977), “The visible hand. In: The Managerial Revolution in American Business”. Harvard University Press, Cambridge/ London.

[7]Graham W. Rider (1970), “Evolution of the concept of logistics.” Naval War College Review, Vol. 23, No. 4, pp. 24-33, U.S. Naval War College Press.

[8]Marx, K., 1939/1953. Grundrisse der Kritik der politischen Okonomie (Foundations of the critique of the political economy).

[9]George C. Thorpe (1916), Scientific American, a division of Nature America, Vol. 115, No. 12, p. 263.

[10] – Hugo, M. (2003). Essentials of Supply Chain Management. New Jersey: John Willey & Sons Inc.

 

 

 

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