Supply chains have always been the backbone of any industry. By operating behind the scenes, supply chains endeavor to deliver the finished and packaged goods to the end user on time. We can trace the origin of supply chain management (SCM) as we know today to post World War II when early efforts were made to mechanize the labor-intensive tasks. Let us take you on a journey of the supply chain’s evolution in the CPG industry.
The Humble Beginning
The earliest conscious efforts at SCM began when World War II revealed the advantages of analytics to resolve logistics issues. One of the earliest books on SCM, entitled The Principles of Scientific Management and written by Frederick Taylor, focused almost entirely on the mechanization of labor. One key lesson learned was that industrial engineering and operations – earlier considered disparate processes – must be integrated to achieve the best results. It was during this period that the Ford Assembly Line emerged to affect a paradigm change in the manufacturing process. Consumers began expecting better and more standardized quality products. The concept of inventory management also took shape simultaneously.
The Technology Era
Even as new concepts evolved, new technology evolved parallel too. The 1960s and 70s witnessed the emergence of road transportation. Where goods were earlier transported by rail – which required long lead times to build up an optimum load – road transport was faster and cheaper. On the one hand, manufacturers began using trucks to transport small shipments, and on the other, businesses began computerizing their processes for better planning and optimization. The two changes worked hand-in-hand to bring about the second paradigm change in the history of supply chains. Logistics gained center stage during this era.
The Lean Era
With the advent of global warming, an awareness of the need to protect the environment emerged. As prices of oil and fuel rose, another major shift occurred. The Toyota Production System (TPS) introduced the 3M model – Muda, Muri, and Mura – into production. Reverse logistics, energy conservation, and sustainability became the mainstay of production. Aligning these demands to procurement and supply became paramount for lean systems. The struggle to procure Just In Time (JIT) and maintain low inventory levels began. Process optimization took center stage in this era.
The Digital Transformation Era
As the concept of ERP introduced in the 90s took hold, organizations began integrating automated processes to provide better visibility across departments and hierarchical levels within the organization. Big data and data analytics took center stage as data volumes grew and new insights emerged. Accountability of organizations increased parallel to the organizational growth. New laws required them to be socially and environmentally aware in addition to being accountable to the customer for product quality, timely supply, and consumer satisfaction.
The E-commerce Era
E-commerce has its roots in 1994 when the first e-retailer NetMarket opened shop. Amazon and eBay were not far behind. However, it was only after the turn of the century that people began looking at e-stores for everyday needs. The new generation consumer demands that every product is of the highest quality, with easy access via whatever gadget he happens to hold. This expectation has given the supply chain industry a new meaning. Meeting lean requirements has become more difficult than ever as the world converges into a single marketplace. Manufacturers are expected to supply goods at a moment’s notice – sometimes quite literally.
What the Future Holds
As the baby boomers vanish and a new generation rises, new expectations come forth. The GenZ demands speed in everything they do – including the delivery of goods and services. These demands have stretched the limits of the supply chain’s evolution.
With e-commerce taking hold, experts envision yet another paradigm shift for the CPG supply chain. Logistics will continue to hold center stage, but the way in which they operate is likely to change. Already one hears of drones used for delivery. As wearable devices enhance consumer experience in the area of healthcare, they are also leveraged for tracking and monitoring shipments. Technologies such as RFID and GPS are being linked to locate goods in transit better and direct them to their destination. Many businesses are experimenting with blockchain to track ownership and reduce transit losses. Industry leaders opine that these technologies are still in their infancy and can be better utilized to optimize the SCM.