The Evolution of Technology in the Supply Chain

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The 1960s and ‘70s saw a fundamental change in the way that we manage information, with the shift from manual record-keeping and transaction processing to using computerised systems to store data.

For the logistics industry, this provided the means and the opportunity to put previously theoretical operational models into practice, setting the stage for improved planning and optimisation. However, the technology of the time was of course limited in what it could achieve, creating difficulties in the transition from theory to practice.

Various models were developed during this period, including the Toyota Manufacturing Program. It was in direct response to this that the principles of Material Requirements Planning (MRP) were defined by Joseph Orlicky.

His book, Material Requirements Planning: The New Way of Life in Production and Inventory Management, was published in 1975. At the time, MRP had been implemented in roughly 700 companies, but by 1981 this had grown to over 8,000, demonstrating the success and rapid adoption of this methodology.

It wasn’t until the 1980s however, with the introduction of personal computers and a subsequent deluge of new technologies, that the MRP model truly took off. Suddenly, planners had access to far greater amounts of information with significantly better visual presentation, thanks to solutions like flexible spreadsheets and map-based interfaces.

In 1983, Oliver Wight expanded on Orlicky’s work and developed Manufacturing Resource Planning (MRP II), bringing concepts such as master scheduling, rough-cut capacity planning and sales & operations planning into the classical MRP practices.

This enabled vast improvements in logistics planning and execution and helped to raise executive awareness of the potential for logistics optimisation. With the right investments in trained professionals and innovative technology, there was clearly an opportunity to drastically improve company profitability (a fact that still hasn’t changed today).

This shift in perception is reflected in the fact that by 1989, approximately one-third of the entire software industry at the time was MRP II solutions sold to American industry ($1.2 billion of software).

Moving into the 1990s, this decade was characterised by two major changes – the introduction of Enterprise Resource Planning (ERP) systems and the rapid globalisation of the supply chain (particularly due to the growth of offshore manufacturing).

ERP systems built on the success of MRP systems, but extended functionality to integrate the multiple disconnected databases that existed in almost every business. Despite some significant struggles with the initial installation and configuration of these systems, the result of ERP adoption was a massive increase in the availability and accuracy of data for planning.

As a perhaps unforeseen consequence of having access to a greater volume of more accurate data, the adoption of ERP systems also served to further increase recognition of the need for better integration and thus, better planning, among various logistics components. From this, a new generation of Advanced Planning and Scheduling (APS) software was born.

Globalisation has had perhaps the most drastic impact of all. Spurred by the growth of offshore manufacturing, particularly the boom in China during the early-to-mid ‘90s, globalisation highlighted the need for logistics strategies that were able to encompass complex and widely distributed networks that spanned across multiple countries and involved numerous partnerships.

The wide recognition of the term “Supply Chain” as we know it today also stemmed from the rising tide of globalisation. It was at this time that the term “Supply Chain Management” was increasingly used to refer to strategic issues, while “Logistics” referred to tactical and operational issues.

As a reflection of the increased association between supply chain management and strategy, in 2005 the Council of Logistics Management changed its name to the Council of Supply Chain Management Professionals. They make the following distinction:

"Logistics is that part of the supply chain process that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption, in order to meet customers' requirements"

"Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole."

As we entered the new millennium, the 2000’s and beyond became an era of heightened connectivity. The explosion of the internet and a dramatic reduction in the cost of transferring information opened the door for new technologies, platforms and services to further revolutionise supply chains.

One prominent example from this period was the catalysation of Radio-Frequency Identification (RFID) technology. Just prior to the turn of the century in 1999, MIT launched their Auto-ID Centre to further the development of low-cost RFID tags and applications and in 2002, completed the first successful move of an RFID-tagged pallet from a Unilever to a Walmart distribution centre.

Although the popularity of RFID technology saw a dip towards the end of the decade it has seen a resurgence in more recent years, largely attributable to the project having led to not only the creation of Electronic Product Codes (EPCs), but crucially, forming the foundation of what would come to be known as the Internet of Things (IoT).

The rising tide of ecommerce also had a particularly dramatic effect, largely for its influence on customer shopping habits and service expectations. Consumers became accustomed to greater choice and availability, to faster delivery times and cheaper delivery costs.

This drastic change in the way that consumers purchase goods put heavy competitive pressure on traditional brick-and-mortar retailers and their supply chains, forcing them to adapt their business models and seek out new strategies to facilitate this changing customer behaviour.

Businesses realised that they needed to offer a seamless, consistent experience across multiple channels to remain successful, leading to the birth of omnichannel – essentially, the concept of “buy it anywhere, get it anywhere, return it anywhere”.

Enabling the omnichannel experience of course poses many challenges, leaving companies searching for new ways to enable more efficient supply chains and fulfilment solutions. Many of the optimisation methods that have been and remain focus areas for supply chains, such as demand forecasting, inventory management, warehousing strategies and distribution practices, all aim to support the shift from supply-driven to demand-driven orientation.

To create these modern, agile supply chains, organisations are investing heavily in a range of digital technology solutions that enable them to optimise processes and operations across the entire supply chain network. In our forthcoming whitepaper, we’ll be exploring the major technology solutions at play and exactly how and why organisations are using them.

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