Evolution of Supply Chain Management

Evolution of grant compass ManagementOver the past 40 years, the traditional purchasing and logistics functions gull evolved into a wider strategic mount to materials and distribution way k directn as SCM. This chapter will review the SCM organic organic evolution over the past decades and the factors that cede influenced this evolution.1.2 Supply range of a function management evolutionAfter Second World fight there was a high need to attach overlapion, the most diverge of the world was suffering from hunger. The world entered in the Productivism era, most manufacturers gave priority to volume merchandise to minimize unit production be as the native operations strategy. This was the first stage of the creation of economies of scale. However, these years 1950s and mid-sixties the theory of provide chain management was unknown. During these years pertly product development was slow and counted only in firms own technology and capacity. scrutinize cushi wholenessd bottleneck operations in order to maintain a balanced line low, resulting in huge investment in puddle in process (WIP) inventory (Tan, 2001). Logistics cost were high as well. At a national level in the USA and UK, they accounted respectively for 15% and 16% of gross national product (Ballou 2007). Further more than, issues carry on with purchasing was unattended by managers at that time, since purchasing was considered as a service to production (Famer, 1997). As mentioned above increasing production was the main objective of this period, teensy-weensy emphasis was on cooperative and strategic buyer supplier partnership. check to Tan (2001), Sharing technology and expertise with customers or suppliers was considered too uncivilized and unacceptable.Tan 2001 argues that, in the 1970s, managers become aware of the huge WIP on manufacturing cost, clean product development, quality, and delivery time. One of the factors of this increased awareness was the introduction of Manufa cturing alternative cookery (MRP). The counseling in this period changed it is non just increase production through spreading the fixed cost to a big out(p)put (economies of scale), rather, to increase performance. The introduction of IT (MRP) in planning the resources of the firm proofs this.During the mid-eighties and mid-nineties, firms deal with increased demands for better, faster, cheaper logistical service. As a result, many manufacturers outsourced logistics activities and their focus transferred to core competencies (Daugherty, 2011). According to Daugherty (2011), the outside specialist presented an economically viable agent of achieving productivity and efficiency. Therefore, many manufactures went more for a descent oriented approach with their supplier and customer. They understood the benefits of cooperative relationship with the other firms in the various chain levels (Stank at al, 1999). Stank at al (1999), show in their report round of the advantages an d benefits that this cooperative relationship had synergy gain through dual-lane expertise and resources, better planning and support, exchange of information, and joint problem solving. another(prenominal) reason that influenced the partnership between supplier buyer was the increased globular emulation (Tan, 2001).In the 1990s was the introduction of Enterprise Resource Planning (ERP), this gave a boost to the evolution of the SCM and buyer supplier relationship. Movahedi at al (2009) argues, while the previous IT resource planning systems (e.g. EDI Electronic Data Interchange) mapping by manufactures were concern mainly with inter organizational desegregation, ERP systems were mainly concern with intra organizational integration. The evolution continues in the 21st century with the development of more sophisticated IT systems (internet base solution systems) which are concerned for both inter-organizational integration and intra-organizational integration. Moreover, th e relationship buyer supplier in this period puddle departed one-step forward, from normal partnership to long-term relationship and strategic alliances. Manufacturers and retailers now commonly exploit supplier strengths and technology in support of new product development, distribution channels, cost reduction etc (Morgan and Monczka, 1995). For example retailers like Tesco use supplier strengths and technology to make own label products which contribute to Tesco overall image.The latest trend of evolution in the supply chain management is the movement towards systems of supplier relations over national boundaries and into other continents (Movahedi at al, 2009). Global Supply Chain Management (GSCM) is the latest concept introduced to the writings of SCM. Now years firms are much bigger than they used to be. They have achieved economies of scale and with the establishment of trade liberalisation policies they are multinationalising their businesses to find the worst sourc es of inputs and growing markets to sell their products. The concept of SCM is not enough for being efficacious and agonistic in the new environment that is why new concept and management strategies (i.e. GSCM) are emerging.An Integrated supply chain gives considerable competitive advantage to the individual actors participating in the chain. Now days in the developed economies there is a switch from firm firm competition to chain chain competition (Koh at al, 2007). This oddment sentence describes better how the supply chain management has evolved over the past decade, by make the different actors in a chain to operate as one big entity.1.3 Evolution stages of supply chain managementBy feeling at the above evolution history, we sens identify some act points in the concept and philosophy of SCM. Some authors have section the evolution of supply chain management into stages (Movahedi at al, 2009 Ballou 2007 ). Movahedi at al, (2009) segmented SCM evolution into three stage s Creation era During the 1980s Integration era During 1990s and continued in the 21st Globalisation era Now daysCreation era, starts (1980s) when the buyer supplier understand the benefits that a cooperative relationship offers. In this period we encounter for the first time the term supply chain management.Integration era starts (1990s) when the IT system EDI is replaced by ERP. ERP focus not only in managing the resources of the individual firm but also the resources of the incorporated supply chain.Globalisation era, starts with the creation of the trade liberalisation policies and the establishment of creation such as World Trade Organization (WTO) and other international institutions that deal with global/regional trade policies.According to Ballou (2007) SCM is not new, it is a evolution of the purchasing and distribution function. The integration of these two functions has generated what we call SCM. issue 1 shows the evolution of SCM as described by Ballow (2007). He has segmented the evolution of SCM into three stages. activity fragmentation 1950s and 1960s Activity integration 1960s to 2000 Supply chain management 2000+As we can see from the figure, in the first stage the activities (from purchasing row materials to terminate product in the shelf of a retailer) are fragmented, there is no integration between them. As a result the cost of finished products (transportation cost, inventory cost etc) are high. In the second stage, there is some integration between the activities but still not fully integrated. The SCM 2000+ is the exsert stage where all the activities are fully integrated leading to cost reduction, shortening of the new product development process, better flow of information, ameliorate cash flow, faster order fulfilment, improved shelf availability and last but not least increased customer satisfaction. From the SCM literature it comes out that customer satisfaction is one of the key driving factors of supply chain evolut ion.Figure 1 Supply Chain EvolutionSource Ballow (2007)1.4 Factors that have affected SCM evolution