A healthy, predictable supply chain is one of the most important dimensions of profitability in many manufacturing businesses, especially for those of a larger size. In its simplest form, the supply chain can be defined as being the activities required by an organisation to deliver goods, or services, to the customer. Whilst over time the complexity, size and scale of supply chains has increased, this premise and purpose has remained the same. The absence of which would prevent consumers from receiving the luxuries and necessities their hearts desire. These being scenarios that have come a little too close for comfort in recent COVID-19 times.
So how exactly have supply chains developed and gone from simple village interactions to complex international operations? What caused supply chains to increase in size and become more complex as they scaled up over time?
During pre-industrial revolution times, supply chains were noticeably shorter than what they are today, and globalization was merely just a concept. Early supply chains, for the majority, were confined to local areas and regions due to the slow natures of transport that existed. For example, bakers would receive the flour from their local mill, who would have received the wheat from a local farmer. The end products of which would then be sold at the local market. Only on very rare occasion would goods be transported between regions during the manufacturing process or on their way to eventually be sold. This was primarily due to the lack of transport, resources, and knowledge required to realise larger scale operations.
This also made supply chains relatively simple. All parties involved were located within relatively close proximity and interacted with a small number of suppliers. Supply chain management was surely being performed at some level, but it wasn't the major field of study it is today. The whole supply chain process itself didn't undergo major changes until the beginning of the industrial revolution. An era that introduced processes and technology still used in modern day supply chains.
The industrial revolution saw the first ventures into the expansion of supply chains with significant improvements being made to railroad infrastructure. Although rail saw supply chains expand out of single locations and regions, international trading remained an uncommon sight amongst countries that weren't connected via land. This required goods to be shipped, a method that was inefficient due to the lengthy transit, loading, and unloading times.
Whilst tools were invented that made handling goods easier, the overall supply chain process itself didn't significantly change. Rather during this period, those implementing supply chains expanded their operations throughout multiple regions.
When the internal combustion engine was invented in the late 19th century, it had a significant impact on a number of commercial areas, supply chains being no exception. Cars and trucks allowed for faster transportation of goods along roads, and the invention of forklifts improved storage abilities. The development of storage pallets also made storage more efficient as it allowed for vertical storage options to better make use of the spaces available.
As World War 2 began, the need for reliable and accountable supply chains grew significantly. Manufacturers played an essential role in delivering the necessary military equipment to their troops. A feat that sparked more formalized research into industrial and supply chain engineering as an academic and well-resourced field of study.
Post the World War 2 era, arguably, the greatest revolution in the history of the supply chain was introduced. This being the standardisation of the mighty shipping container. In all its 20-foot glory, the shipping container standardized how goods were transported during the supply chain process. The ability to transport the same shipping container via road, rail or boat generated cost savings and efficiency gains that were present throughout the supply chain. A driver that played a large part in making global trade more affordable and therefore accessible.
With the invention of the personal computer, it wasn't long until it had an impact on the supply chain process. A new information age emerged, one that replaced the need for data to be manually entered and stored using paper-based systems. The introduction of computers saw data storage and shareability became more efficient and simpler and the availability of information significantly increased. New data forecasting abilities with predictive analytics opened, increased storage ability, and streamlined the ability to plot delivery routes and manage inventory.
Since the adoption of digital technology into supply chain management processes, the field has continued to realise major efficiency improvements. Software developments have enabled advancements into new areas of air transportation and the internet of things enhances the way products are able to be tracked. This period also saw Asia emerge and become a global manufacturing powerhouse with China, Japan, India and South Korea alone, currently accounting for 41% of the world's manufacturing output, further fueling the growth of globalization.
Demand for ethical and environmentally friendly supply chains is now also having a strong impact on how businesses interact with suppliers. Consumers are demanding transparency throughout the supply chain process to see whether the goods they purchase negatively impact the climate and to ensure they have been made without the exploitation of child labour. In a survey by Open Text, 81% of respondents said purchasing from ethically sourced and produced products mattered. Approximately 83% then stated that they're willing to spend around 17.5% more on purchasing ethically sourced and produced products.
These efforts, combined with the continued developments of technology to improve the collection and interpretation of various data, have shaped modern-day supply chain operations. No longer are supply chains limited to local regions, like that of the post-19th century era. Supply chains now have global reach whilst maintaining the same connectivity levels of the earliest forms.
