The Evolution Of Supply Chains – Part 2: Command and Control

In our previous blog post, we learned that Supply Chain Management (SCM), was born in an era of transition.  From manufacturers ‘pushing’ the products they could most easily or profitably make… To one where they had to be responsive to customers demand for choice and variety.  This made a big difference. Plans and purchase orders that assumed Q4 would be much like Q3 were no longer appropriate.  Supply chains now needed to be planned and executed ‘Just In Time’, to avoid being caught with obsolete or finished goods.

IT revolution

The nascent IT revolution made this theoretically possible. Bar codes and ePOS systems, for example, meant that real current demand data could be readily gathered. ERP systems could calculate quickly what changes in demand and production meant in terms of input requirements.

But, a lot more data now had to be transmitted, a lot more frequently, to a lot more suppliers, carriers and other agents. Many of these had only an arm’s-length relationship with the manufacturer at best.

Sequentially re-keying and re-Faxing demand signals from dealer to factory planner, to buyer to T1 supplier and T2 supplier was a nightmare in itself. On top of this warehouses, transport companies and everyone else had to be copied in.  Meaning that at any point a message could be corrupted, misinterpreted or ignored.

The EDI Era

A solution came in the form of EDI (Electronic Data Interchange). Documents, orders, drawings in standard formats could be disseminated accurately, rapidly and simultaneously throughout the distribution and supply networks. But there were snags.

EDI was expensive to set up and to run. Every participant had to invest in appreciable computer power, telecommunications links, and ongoing IT support. On boarding a new supplier took significant time, money and training. EDI protocols and formats were at best sector-specific, so a supplier would have to be conversant in several different systems.

Successful EDI required a major corporation at a key point in the supply chain to command, control, mandate and invest. This has been a major reason why industry in general has found it hard to emulate the ‘best practices’ of the retail, automotive or electronics sectors.

The Internet Age

In recent years, of course, this has all changed. The Internet, Software as a Service, mobile devices and other developments have made fast, accurate communication, to common Standards, up and down the supply chain possible. Moreover, they are accessible and affordable to almost any potential player.

Huge elements of time, cost and error is removed from supply chain administration. Problems and exceptions are flagged up in the right place immediately, and sender and recipient don’t have to be sitting at an office PC. The ‘penalty’ for changing an order, a forecast, or a supplier is also greatly reduced.

Supply Chain Management can routinely operate at levels of sophistication and responsiveness that were simply inconceivable in the days of the Fax machine.

But at heart, SCM practice is still based on hierarchies and sequences of operations. Is it time to break the chains and try to build supply networks, or even supply ‘hives’?

In part 3 of this blog series, we will review how data is shaping the next evolution of supply chains management.

We hope you enjoyed this blog and would love to hear your thoughts and comments on the subject.  In the meantime, please follow us on Social Media, to be sure to get the latest updates.

   

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