Future of Supply Chain Management
The history of supply chain management began in the 1980s, starting with logistics change due to personal computers’ emergence. Before the 1980s, the term logistics was mainly used in referring to the management of the flow of goods from the point of origin to the end of consumption. Although the logistics and supply chain-related to the movements of goods and services in the market, the term supply chain management refers to organizations since it is defined as the systematic, strategic coordination of the business operations in the market in an organization and across the industry to improve and sustain the performance of the organization and the market industry which it operates. The change in definitions enhanced the broadening of the functions and operations in supply chain management to incorporate value chain management and supply pipeline management while defining the aspect of supply chain management. The history of supply chain management is marked by transformations in innovation, events, and processes.
The firsts supply chain management identified as logistics comes of Age period started in 1980, which was marked by numerous innovations. This period saw the spawning of new technologies. The Production and Distribution Research Center was the early innovation leader in enhancing map interfaces to optimize supply chain design and distribution planning, models. Innovation in material handling was enhanced by innovation from Material Handling Research Center. Simultaneously, the Computational Optimization Center led to large optimization algorithms offering solutions to scheduling problems in transportation management (Robinson, n.d.). These innovations led to the need for trained professional labor. In the 1990s, supply chain management experienced the technology revolution with the emergence of Enterprise Resource Planning (EPR) systems, whereby many companies were utilizing it by 2000. EPR systems led to better planning and integration among logistics components, leading to Advanced Planning and scheduling (APS) software. However, it was not until the era of globalization in the 1990s that the supply chain gained global recognition due to the increased Chinese manufacturing growth. The growth has led to the distinction of supply chain management and logistics, with supply chain management referring to strategic issues while logistics refers to tactical and operational issues. In 2005 Council of Logistics Management changed to Council of Supply chain Management Professionals to signify the differences (Robinson, n.d.). This led to the emergence of a green supply chain in the field of supply chain management. Nevertheless, the supply chain management continues to change with the increased advancements in technology and economic and political changes. Therefore there is a need to look into the future of supply chain management by identifying the current technological and political trends in globalization, how they become a challenge to supply chain management, and solutions to the challenges businesses face.
Supply chain management continues to experience changes through technological innovations. Some of the technological trends reshaping and restructuring supply chain management operations and functions include road transport technologies, which are meant to improve the speed of delivery by enhancing fuel efficiency through innovation that enable the use of different transports models depending on the road’s surfaces and terrain in other demographics. Also, supply chain management uses solar energy through innovation that helps them utilize shipping from solar-generated power (Lund et al., 2019). The 3D printer’s technological changes are also changing the dynamic of operations and activities in the supply chain management due to its ability to reduce the cost and time of designing in the manufacturing process.
The technological changes advanced through globalization result in management changes in the supply chain since they drive global supply chains. The development of technologies has significantly led to the emergence of e-commerce that increases competition by enabling the organization to adopt different marketing and operations strategies such as agile consumer-based marketing to meet the changing demands and expectations of consumer’s behavior due to online shaping. Similarly, technological advancements have led to an increase in international purchases by making labor and material costs cheaper in different parts of the world (Hu & Haddud, 2017). It also results in the strengthening of consumption power, which forces the companies in various industries to enhance their marketing strategies in offering solutions to consumption changes by improving their marketing messages to attract more consumers by exploiting the opportunities provided by the e-commerce and use of internet platforms.
Similarly, the political aspects have changed the elements of supply chain management and continue influencing it in many different ways in the future due to the ongoing changes in the balance of global powers, which has led to the shift in the locus of economic power to a vacuum leading tom lack of global leadership in global supply management (Lund et al., 2019). Political changes result in the emergence of the bifurcated world, which results from trading restrictions and tariffs among countries limiting the free flow of goods and services. Nations are significantly changing concerns to strengthening domestic markets and industries while systematically discriminating against foreign firms with the various trade regulations and policies that have rather turned the global supply management governance into an unpredictable variable in making an effective business decision unpredictability of the political changes among countries. Countries are tremendously showing defiance of the principles of classical economic liberalism, with the recent World Justice Project 2019 report ranking China 82nd, which is its lowest in their measure of the Rule of Law Index (Petricevic & Teece, 2019). However, the technological and political trends in globalization and supply chain management lead to reduced trade intensity and the shift of the supply chain into upstream activities with more investments in research and development and design while also increasing the downstream activities such as distribution, marketing, and after-sales services.
Supply chain management shifted from global undertaking and becoming more of the regional undertaking and reducing costs. Companies and industries, especially from North America, must deal with the market shift to the western market. As the expansion of supply chain management into Chinse markets and other developing countries due to the problems they create in loss of value and capital. However, the countries also face tremendous challenges in dealing with the global supply chain changes and dealing with its uncertainty in the world market.
During the Covid-19, faced challenges in dealing with the crisis, which has affected the global supply chain management. The lack of preparedness in a risk mitigation and response strategy is becoming a challenge in dealing with supply chain management changes and makes the companies vulnerable to future uncertainties in the market. North American market have concentrated their market in one region, which makes it challenging to respond to the changes in the politics of different countries such as the U.S.-China trade policy whiplash, Brexit, and the coronavirus, which has greatly highlighted the weakness in utilizing traditional supply chain design based on the assumption of the principle of a free flow of goods and services across the market (Rice, 2020). The changes and vulnerabilities have demonstrated that global companies and industries need to diversify their markets and become more agile and flexible to changes in international trade policies and supply chain management.
The companies and industries in North America find it challenging to deal with the current technological and political changes and the future uncertainty in supply chain management since their production is based on the capitalization of labor-arbitrage opportunities available in China and developing who offer cheap labor than developed countries. However, the dependence on low-cost labor in production is also detrimental for the market and industries in the region due to the uncertainties that the future of global supply chain management faces with business and market complexities (Lund et al., 2019). The unpreparedness of the market and industries in responding to the changes is evident through the financial crisis of 2008, which affected the global supply chain management, and the current Covid-19 pandemic, which has affected the major market in Europe and North America, leading to tremendous job loss. The supply chain management shifting due to the emergence of various markets and rising labor costs in these regions leads to the shift of manufacturing locations to low-cost labor in developing countries. North American countries are faced with the challenge of choosing which low-cost market to source from as the developing countries market become credible suppliers in the global supply chain management. The countries also face the challenge of dealing with the rising complexities due to the huge population resulting from the proliferation of product variants in the market. According to Malik, Niemeyer & Ruwadi (2011), large North American grocers exceeded 100,000 in 2009, making it hard to deal with the rising complexities.
However, organizations need to become prepared to handle and respond to the future of supply chain management, which is characterized by increased global uncertainty and business complexity. These challenges arise from unstable trade and capital flows, which are enhanced by the shifts associated with the developing world’s economy’s growth and development. Caterpillar’s CEO acknowledges that they must manage the supply chain management uncertainties and complexities effectively for a company to gain a competitive advantage. Operational management strategies are key to achieving a competitive edge. Companies must become agile in their operations by utilizing the technologies to optimize the supply chain management opportunities offered by the digital transformation and the emergence and expansion of the e-commerce market. Companies must have the capacity to embrace the digital transforms in enhancing their relationship with the customers as they obtain information which helps them meet the rising and changing consumer behaviors to serve their customers better through diversifying their supply chain into smaller and flexible units (Malik, Niemeyer & Ruwadi, 2011). Also, companies need to enhance their market strategies by reevaluating their operations while incorporating a market analysis for future risk. This helps them be well equipped in dealing with possible future uncertainties with flexibility and simplicity. This is enhanced by promoting and maintaining a positive skepticism environment in the organization, which utilizes the information from the digital platforms and engages with the consumers in understanding the current and the future unforeseen possible threats in the market.
Similarly, companies need to create a comprehensive emergency operations center that undertakes predetermined action plans. Communication and coordination are key in dealing with threats and complexities in the market since it stipulates each level’s roles and functions in the organization’s operations, enhancing decision-making. The emergency plans should bring the organization’s customers and supplies together and involve them in the decision-making levels. It is also important to ensure that the institution’s employees are always valued by increasing their motivation and satisfaction levels in the institution since they contribute to enhancing and developing innovative operations strategies in the organization.
Consequently, the future of supply chain management has challenges and opportunities which a company can either exploit or avoid with effective planning and use of effective operational strategies. Digital transformation is increasingly transforming globalization, which is also restructuring and reshaping global supply chain management by shifting the market to a more labor cost orientation and affecting the capital flow in the market. Political policies and differences are increasingly affecting the global supply chain management with the change in the balance of economic power. Expansion and growth of the Chinese market are also contributing to the increase in global supply chain management transformation. The supply chain’s future faces numerous uncertainties and complexities due to the increasing market changes and trends in world trade. However, there is a need for the institution to diversify their production and transform their supply chain management into numerous differentiated undertaking rather than dealing with a monolithic supply chain management line which is facing challenges in realizing the benefits from optimizing the technological changes in the market since there is no more free flow of goods and services across nations.
References
Hu, J., & Haddud, A. (2020). Exploring the Impact of Globalization and Technology on Supply Chain Management: A Case of International E-Commerce Business. In Supply Chain and Logistics Management: Concepts, Methodologies, Tools, and Applications (pp. 1353-1376). IGI Global.
Lund, S., et al. (2019). Globalization in transition: The future of trade and value chains. McKinsey Global Institute. Retrieved from https://www.mckinsey.com/featured-insights/innovation-and-growth/globalization-in-transition-the-future-of-trade-and-value-chains#
Malik, Y., Niemeyer, A., & Ruwadi. (, 2011). Building the supply chain of the future. Mckinsey Global Institute. Retrieved from https://www.mckinsey.com/business-functions/operations/our-insights/building-the-supply-chain-of-the-future
Petricevic, O., & Teece, D. J. (2019). The structural reshaping of globalization: Implications for strategic sectors, profiting from innovation, and the multinational enterprise. Journal of International Business Studies, 50(9), 1487-1512.
Rice, J. (2020). Prepare Your Supply Chain for Coronavirus. Retrieved from https://hbr.org/2020/02/prepare-your-supply-chain-for-coronavirus
Robinson, A (n.d.). [INFOGRAPHIC] The Evolution and History of Supply Chain Management. Retrieved from https://cerasis.com/history-of-supply-chain-management/