The development of supply chain management

According to an Economist.com 'Management Idea' article, because companies such as Wal-Mart, Dell and Toyota have managed to achieve extraordinary success while doing fairly ordinary things, many managers have realised that what they produce can be less important than the way they produce it. Central to efficient production is supply chain management - the collection and distribution of all the inputs to the production process.

The Economist.com article explains how supply chain management has changed over the years. Tradtionally, companies ensured that the appropriate components were available at the right time by holding large stocks in their warehouses, so they could be drawn upon as and when required. However, Toyota's JIT (Just In Time) system changed all that, and companies became aware of the unnecessary costs involved in having warehouses full of stock. Instead, they looked to manage supply chains so inputs arrived only when required.

Over the years, supply chains have become more complicated as business has become more international, but improving technology has changed processes as well as the products themselves, with improved information systems enabling managers to find out exactly what is where and when.

According to the article, radio frequency identification technology promises to streamline processes even further: "RFID involves implanting every package of goods with a small radio transmitter, enabling its owner to know exactly where it is every minute of the day. Following its movements could become a bit like being in an airplane watching a screen on which the progress of the plane is shown by an arrow moving across a map of the world."

Supply-Chain Management
Adapted from The Economist Guide to Management Ideas and Gurus, by Tim Hindle, Economist.com, 06/04/09