SCM30: How Has Technology Changed Supply Chain Management Today?

Published May 4th, 2012 by John Westerveld 3 Comments

It’s been quite a week over at the Supply Chain Expert Community. In an ongoing series to celebrate the 30th anniversary of the term “supply chain management,” Lauren Bossers posted the question “How has the evolution of technology changed supply chain management today?” We had some insightful responses that covered some of the most important changes that have impacted supply chain management. For the full comment, look at the post. I’ve included some of the highlights here.

Dustin Mattison observed that “Technology has only changed supply chain management in so far as our mindsets and organizational cultures have changed,” arguing that, in fact, people and mindsets lead organizational change, and the technology needs to keep up. He goes on to add that supply chain collaboration technology has the potential to increase in value as the number of people using the technology increases. He draws a comparison to Google search where the more people using Google, the better the search results.

Richard Cushing had several points starting with the fact that the introduction of the personal computer and the subsequent commercialization of the internet empowered buyers to gain access to a plethora of goods and services from around the world. The interesting side effect is that it drove competition into markets that didn’t realize they were competing. This global competition drove costs and prices down and drove a new growth industry – global logistics. The fact that small businesses now had access to computing power and the internet drove other changes to what we now consider the supply chain; small manufacturers discovered that they could effectively focus on their core products and competencies and outsource the rest, thus increase profits. Companies recognized that data needed to be shared if supply chains were to work effectively. Companies came to realize the importance of logistics to support the new global supply chain. And finally, companies started to understand that they weren’t just competing on products and brands, they were competing with their supply chains.

Richard finished with a the following; “After 30 years of technology involvement in the supply chain, it is not the cheapest manufacturers, or the highest quality products, or even the best marketing that makes for industry leadership. More and more it can be said that it is the most effective supply chains – those supply chains that take the lead in meeting and exceeding customer expectations with speed and value – that win the day and will continue to make more profits tomorrow than they made today.

Tom Brouillette’s focus was on warehousing and logistics. He commented that warehouse management systems have evolved from a policy of “No mouses in warehouses” to basic systems that formed the foundation for a homegrown WMS to fully packaged systems that, once configured, work out of the box. Tom also observed that the internet was a great equalizer when it came to information exchange. Back in the 80s, electronic information exchange was accomplished using EDI (electronic data interchange), which, while effective, was extremely expensive to implement.  Further, the ongoing costs of the value-added networks (the companies that acted like internet providers by controlling the flow of data between trading partners) would preclude mid- to small-sized companies from taking part. When PCs and the internet came along, companies that couldn’t afford to do electronic data exchange could now take part. Tom also talked about the ever growing use of RF technology and how that has impacted the supply chain. He wrapped up his response by pointing out how pervasive technology is in our personal and business lives, with hardware, social software and the internet increasing the velocity of change and the impact of change on our personal lives and on business.

Jim Fulcher also agreed with Richard and Tom that technology really impacted the supply chain with the personal computer and the internet. He went on to say that computers led to software solutions which led to enterprise solutions that strove (sometimes unsuccessfully…even today) to integrate the various business systems. He has also seen an increase in collaboration that has been enabled by technology. His thinking is that supply chain collaboration plays a critical role in creating an agile supply chain.

My own manufacturing career started in the mid-80s, so I’ve been able to observe firsthand the transformation that technology has caused in supply chain. To see this transformation, it’s sometimes fun to look back at how things were 30 years ago:

  • I had hair. (But that’s beside the point)
  • Some companies were still not using computers for supply chain. They were using inventory control cards and manually entering orders, withdrawals, allocations, scheduled receipts and inventory balance

Supply Chain Management

  • Those that were used green screen systems hooked into large mainframe computers. The screens allowed interaction with a single part at one time. Planners learned to be proficient by remembering obscure screen names (actually…reminds me of using SAP today…maybe some things don’t change much) and by muscle training the number of tabs to get down to the quantity field.
  • Personal computers were just starting to make their appearance, but were used mainly for generating simple reports, not so much for hard data crunching.
  • Systems were much simpler, yet the supply chain itself was simpler, too. Companies didn’t have many of the complexities of today’s supply chain; wide varieties of model options, distributed supply chain around the world, significant lead time pressures and very volatile demand. So, if MRP took a day to run, well that was OK…in fact, companies were encouraged to run MRP less frequently to reduce system “nervousness” (the idea that it’s better to run less frequently, because if something changed today then changed again tomorrow, you would only need to react to one change rather than two).

Now let’s look at some aspects of today’s supply chain. Unfortunately, some things haven’t changed much; Large ERP suites still run in batch mode and still take way too long to plan. Further, ERP systems (even though they are considered a suite and are from the same vendor) still are not well integrated and need to transfer data from system to system.

But it’s more fun to focus on the things that have changed. The biggest change that I think can be attributed directly to technology is the velocity of business and the incredible rate of change we are seeing around us; new products come and go in the blink of an eye. If you bought an Android phone last month, it’s already out of date. The iPad has gone from not existing a few years ago to selling millions per quarter. Technology plays multiple roles in making this happen. In one role, technology itself drives the demand for new products. Technology websites, blogs, podcasts and YouTube all help drive up demand (or drive down demand in some cases) for new products. In another role, technology enables companies to design, source, manufacture and distribute these incredibly complex devices at a blistering pace.

What technological changes are enabling manufacturers to keep up with this insane pace of innovation and demand change? The obvious technology enabler would have to be the internet and how the internet enables communication and collaboration. Even the most technologically challenged company sends information via e-mail. This alone speeds communication drastically. More advanced companies use web services to enable system to system communication such that your suppliers are aware of changes almost at the same time you are. Collaboration is also enhanced via the internet. Video conferencing, instant messaging, sharing pictures over mobile devices all means that ideas and concepts can be shared around the world without the need to travel. I can go home, have dinner and meet with colleagues in Asia…then get upstairs in time to watch “Big Bang Theory” before going to bed.

Looking to the near future, the next change to watch in terms of supply chain management is mobile. The day is coming when planners will be able to monitor supply chain performance and manage day-to-day supply chain issues from their smartphone. We are already seeing supply chain apps that enable some supply chain interaction through devices like the iPad. These applications aren’t perfect but they are clearly showing the path ahead. It’s a great time to be in supply chain management!

What do you think are the key technological changes impacting supply chain management in the last 30 years? What technology changes do you see coming? Comment back and let us know!

Follow comments on this blog post via RSS

3 Responses to “SCM30: How Has Technology Changed Supply Chain Management Today?”

  1. Paul Gooch

    Dear John, back in 1985/86 I was the Regional Product Flow Manager for Dow Chemical in the UK. We had moved on from Distribution…but had not yet reached the dizzy heights of Materials Management, let alone Supply Chain Management. Anyway, I joined Dow’s European Product Flow Meeting in Bilbao where Booz Allen & Hamilton were the invited speakers. We assembled in the bar on the first evening and were introduced to the Booz guest who was perched on a bar stool…yes, none other than Keith Oliver…who proceeded to hold court, and it was obvious he had been briefed. He told us “our systems sucked”, we were silo’d out, and it was time we got our heads around the concept of Supply Chain. Little did we know then how Keith would influence our thinking and our careers, and where that Supply Chain journey would take us…but looking back, we were privileged to have been in his company, and to have a boss with the vision to invite him.

  2. John Westerveld

    It’s amazing how sometimes a simple event like having drinks in a bar can drive significant change like this. The key is having the wisdom to listen and the strength to make the required changes.

    Thanks for sharing Paul.

  3. roy omondi

    can technology assist in creation of employment in supply chain? thank you

Leave a Reply