The Origins and Growth of Supply Chain Management – and the Need for a Common Lexicon
The term “supply chain management” quickly exploded into the public lexicon during COVID, at which time people would often heard saying “blame it on the supply chain”! For the first time in my 35 year career, I was also inundated with calls from the media wanting to know what was going on with our supply chains. Indeed, supply chains were effectively shut down during COVID, and I was closely involved with several federal efforts to obtain critical materials like PPE, drugs, and other initiatives. Over time, the term has grown to the point where most business schools have a Department of Supply Chain Management, academics have expanded the topic to include a variety of specialized areas within the field of supply chain management, including human resources in SCM, urban logistics, transparency in software, human behavior, supply chain nethics, supply chain finance, supply chain analytics, and a host of other issues shown in Table 1. Indeed, the field has also exploded into an entire software industry devoted to a number of various areas, including Manufacturing Planning and Control, OPM, warehouse management systems, transportation management systems, retail assortment planning, and a variety of other areas that are now evaluated annually by Gartner. There is even a “Top Supply Chain Organizations” (which will be revealed for 2024 on May 22) and “Top Supply Chain Universities” competition every year, in which marketing groups scramble to get on the list.
Table 1 – Mapping the Landscape of Supply Chain Management (Handfield, Wieland, and Durach, 2016)
Where did the term supply chain management originate? And how has it become so popular?
The origins of the term was documented in an article by Tim Laseter and Keith Oliver, two consultants from Booz Allen, in 2003. Mr. Oliver claims that the term was born in a discussion with clients in the late 1970s:
Mr. Oliver was formulating his ideas through work with a number of clients, including SKF, Heineken, Hoechst, Cadbury-Schweppes, and Philips. Many of the ideas jelled during an engagement with Philips, the Dutch consumer electronics manufacturer. He began to develop a vision for tearing down the functional silos that separated production, marketing, distribution, sales, and finance to generate a step-function reduction in inventory and a simultaneous improvement in customer service. Looking for a catchy phrase to describe the concept, the consulting team proposed the term integrated inventory management. In a sure sign that consultants should not be allowed near promotional issues, the group expressed confidence that the world would adopt the sophisticated-looking abbreviation I2M.
Later, at a key steering committee meeting, the team shared the vision and introduced the new term and accompanying abbreviation. Eyes glazed over as the phrase failed to resonate with participants. One manager, a Mr. Van t’Hoff, challenged Mr. Oliver to explain what he meant by “I2M.”
“We’re talking about the management of a chain of supply as though it were a single entity,” Mr. Oliver replied, “not a group of disparate functions.”
“Then why don’t you call it that?” Mr. Van t’Hoff said.
“Call it what?” Mr. Oliver asked.
“Total supply chain management.”
The term was formally introduced to the public in an interview with Mr. Oliver published in a 1982 Financial Times. The term supply chain management (SCM) could have easily disappeared into the history of business jargon. IInstead, SCM rapidly passed into the public domain — a sure indication the concept holds meaning for executives wrestling with the endless challenges of procurement, logistics, operations, sales, and marketing activities that fall within its realm.
However, the term became widely adopted after the publication of the seminal book Introduction to Supply Chain Management in 1998 which I wrote with my colleague Ernie Nichols, during the time I was at Michigan State. This was a thin paperback that sought to simplify the concepts of supply chain management into a practical framework, and was conceived as the two of us began a conversation around the lack of a common definition for supply chain management. (The book became a best seller, selling more than 25,000 copies and was translated into Japanese, Korean, Chinese, and Russian. It has been cited in almost 5000 different academic journal articles. Who would have thought?)
- In this book, we proposed that the field of supply chain management is based on three simple ideas. First, every organization must make a product or provide a service that someone values. Otherwise, why would the organization exist? Think about it. Manufacturers produce goods that are used directly by consumers or as inputs by other manufacturers. Transportation companies like Schneider provide valuable services by moving and storing these goods. Design firms such use their expertise to design products and create corporate images for customers. The need to provide a valuable product or service holds true for non-profit organizations as well. Consider the variety of needs met by government agencies, charities and religious groups, for example.
- The common thread is that each of the above organizations has an operations function, or operations for short. Simply put, operations is the collection of people, technology, and systems within a company that has primary responsibility for providing the organization’s products or services. Regardless of what career path a student might choose, you will need to know something about your company’s operations.
- As important as the operations area is to a firm, few organizations can – or even want to – do everything themselves. This leads to our third point: Most organizations function as part of larger supply chains. Supply chains encompass all activities associated with the flow of goods from the raw materials stage (extraction), through to the end user, as well as the associated information flows. Supply chains link the operations of many firms together.
I first introduced the concept of supply chains to a group of executives at Michigan State in 1998. I proposed the idea that multiple organizations would be connected together through integrated software systems, and would be able to look at inventory as if through a glass pipeline, being able to see where products were, if they were constrained, and where the bottlenecks were occurring. These executives stared at me as if I had been smoking something…they could never imagine that one day this vision would become a reality.
Although there has been an incredible amount of research in the field and massive advances in supply chain software solutions, there still remains many unsolved problems, and many areas for on-going discovery into research in the field. For instance, there are now different levels of maturity of supply chain performance, that document the progress that organizations are making towards a fully integrated supply chain...
The Need for a Standard Supply Chain Lexicon
One of the biggest challenges facing the field is the lack of a standardized lexicon that serves as the foundation for effective global trade communications across industries in different supply chains.
The ASTM F49 International Committee on Digital Information in the Supply Chain is focused on providing the data standards necessary for next generation efficiencies in the global supply chain process covering all major modes of transport: Ocean Full Container, Ocean Less-Than-Container, Short-Sea, Road, Rail and Air. Supply Chains face poor performance of logistics resulting from massive problems and disruptions caused by the current inadequate communication processes. F49 will deliver standardized common language, common processes, and information exchanges that will remove roadblocks to better performance of logistics and Supply Chains.
I am working on a F49 committee founded by the American Society for Testing and Materials, which is working on this very problem. Our early work reveals that there is indeed almost no match in terms between the major non-profit supply chain organizations, including ASCM, CSCMP, GS1 and others. We need supply chain experts to volunteer and help this effort! You will learn a lot, and get to interact with others in moving the field of supply chain management forward!