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SCM: The past is prologue
When asked to contribute an article for the inaugural issue of CSCMP's Supply Chain Quarterly, I felt honored and, to a significant degree, intimidated by the challenge of writing about my perspective on the history of the discipline we call supply chain management.
Well, I do have a perspective, which has quite often been shared at professional meetings and in numerous classrooms. To the best of my ability (and memory), I will present in this article my thoughts on how supply chain management got to where it is today. As a lifelong educator, I can't resist also including a few comments concerning where I think we are going as we deal with globalization in the Information Age.
Before I begin, let me say that two ground rules are in order. First, I will not name specific individuals who made the events I've chosen to discuss a reality, thereby assigning neither fame nor blame. And second, I've borrowed Walter Cronkite's trademark "And that's the way it is" closing to his nightly news broadcast—but my version is "And that's the way I see it." That is to say, my interpretation is only one perspective concerning what happened.
There have been many men and women who have contributed to the development of the discipline of supply chain management. It is to them I dedicate this bird's-eye view of history.
What is a discipline?
I remember sitting in an undergraduate political science class when the professor asked each of us to write an essay defining a "discipline." As I recall, I never did get it right to his satisfaction. Some 50 years later, at the 2006 CSCMP Doctoral Consortium, I once again faced that question when a doctoral candidate asked, "Is supply chain management a discipline?" Since by that time I had both gray hair and tenure, I felt confident in answering, "Yes."
In my opinion, a discipline is an integrated body of knowledge that defines the theory and practice of a field of study. A discipline explains interrelationships between knowledge and practice in the form of constructs, which ideally are supported by empirical research and documentation. Perhaps most importantly, the totality of a discipline provides a framework to help anticipate or predict outcomes.
Supply chain management is a discipline because it offers an integrated body of knowledge to guide research and practice. To support this conclusion, I have used a time line that captures the sequence of events leading to the development of the body of supply chain knowledge.
A view across time
The roots of the discipline of supply chain management can be traced back to the Great Depression, World War II, and the post-war economic boom of the late 1940s. Following World War II, we lived in a world that had survived deep despair and deadly conflict. Consequently, we were immersed in an economy driven by pent-up demand and characterized by unprecedented growth.
At that time, some of the most complex business problems were directly linked to distribution. But the war effort had made people aware of a possible solution to those problems: logistics. Primarily a military concept, logistics was defined as the science of supporting global operations.
At the heart of logistics was transportation. The rapidly growing economy couldn't get enough of it, and by 1950 we were experiencing what one might call transportation's heyday.
The 1950s: Transportation managers gain control
Among the most powerful corporate executives in those days were a select few who had been ordained vice president of corporate transportation. Executives at this and many other levels of the transportation hierarchy controlled the movement of freight in a transportation industry that was highly regulated by both state and federal governments. This was the era of traffic clubs that served as both professional and social strongholds.
The traffic manager of the 1950s was expected to continuously reduce the cost per hundredweight (CWT) to move products and materials. This single yardstick was the barometer of success.
But doubt was beginning to cloud the horizon. Many managers began to challenge the accepted definition of the total cost to serve. What about the cost of inventory, they wondered. Could a business reduce its total cost by spending more for transportation if it achieved faster and more dependable delivery?
The best practices of the day were being called into question—and those asking the hard questions were not necessarily senior leaders. They were most often middle managers and a few educators who felt that there were better ways to utilize business resources. This growing group began to talk about "total landed cost." Borrowing from the logic of electrical systems theory, they created a framework for quantifying total logistics costs, and they structured examples of costto- cost trade-offs, such as transportation for inventory. Their surprising conclusion: A combination of individual, lowest-cost activities didn't always equate to the lowest total cost.
Clearly, change was in the wind. In fact, the first course in physical distribution management, a combined undergraduate and graduate seminar, was offered on an experimental basis in 1958. The curriculum explored a combination of real estate, facility location, inventory management, warehousing, and transportation, all loosely linked by a systems-theory framework. I was one of a half-dozen students who enrolled in the initial seminar–wild stuff for those times! We all came away from that seminar fully committed to one of supply chain's first constructs: total cost.
The 1960s: A new organization emerges
As the 1960s unfolded, more practitioners and academics were attracted to the mysteries of total cost and its far-reaching ramifications. Forums for discussing such "out-of-the-box" ideas were few and far between. The American Marketing Association dabbled a little with the concept but soon turned its attention exclusively to marketing. In 1962, the American Management Association facilitated a forum on the topic of total cost in Saranac Lake, New York. What happened next was truly an unexpected consequence of that meeting.
Within weeks, eight disciples of the total cost concept began to organize their own forum. Following two preliminary meetings in 1962, an expanded organizational session took place in St. Louis, Missouri, in January of 1963. Others joined the original group in St. Louis to discuss forming an organization that would serve as a platform for dialogue about the new concept. One of the main debates was what to call the emerging organization. Some argued that the name should include "logistics," while others argued that logistics was "too militaristic" to be adopted by industry. Finally, the group coined and adopted the term "physical distribution management."
That movement became the basis of a new organization— the National Council of Physical Distribution Management (NCPDM)—that was formed in December 1963. The fact that we were thinking at a national level conveys a great deal about our vision. I don't, however, recall anyone at those meetings talking about a global organization.
During the 1960s, the doctrines of physical distribution management slowly but surely emerged. As time would prove, the concept of physical distribution was here to stay.
As the discipline started to emerge, so did literature expressing varied approaches to cross-functional management. Universities began to explore new course structures, and curricula rapidly expanded. In 1968, the first physical distribution textbook joined the growing arsenal of teaching materials.
The discipline received a great boost on April 6, 1965, when the late Peter F. Drucker addressed the annual meeting of the fledgling organization. Dr. Drucker's address was titled "Physical Distribution: The Frontier of Modern Management." His remarks contained many nuggets of encouragement, but two in particular stood out. Early in his address, he defined physical distribution this way: "Physical distribution is simply another way of saying 'the whole process of business.'" I can assure you, that comment turned some heads! In his closing remarks, Dr. Drucker put the ball in play with the following statement:
"The only model of a business we can so far truly design—the only operational system, in other words—is that of the business as physical distribution, as a flow of materials. And because our new tools are particularly adept at handling such physical phenomena, we can have powerful results as soon as we study, analyze, and reshape this system. Physical distribution is thus today's frontier in business. It is the one area where managerial results of great magnitude can be achieved. And it is still largely virgin, a largely unsettled frontier."
Following resounding applause, we all departed the hall in quiet anticipation.
The 1970s: A body of knowledge begins to mature
With the benefit of hindsight, the decade of the '70s is best viewed as a period of conceptual consolidation. The concept of total cost gained legitimacy as more businesses began to recognize, adopt, and implement its logic.
Companies found their proof of performance in the dramatic, cross-functional cost savings they achieved by applying the principles of physical distribution. Managers redesigned their finished-goods distribution strategies. Many of these strategies began to explore different levels of customer service performance.
Soon the domains of the emerging discipline began to focus on measuring cost-versus-service trade-offs. The logic went something like this: Once the total cost to serve had been identified, it became possible to increase and decrease service levels as a means of determining and quantifying customer sensitivity. Bingo! The focus of physical distribution quickly shifted from purely cost to include a concurrent focus on customer service. Thus, the focus was on a combination of top-line revenue growth and bottom-line profitability.
Looking back, the 1970s were among the most prolific of the early decades of supply chain management. The maturing discipline was creating a growing body of knowledge. Attention was focused on both profitability and customer satisfaction. And the groundwork was already being laid for gaining the boardroom's respect and acceptance.
New developments came quickly in two distinct tracks. The first followed the original orientation of physical distribution, looking "downstream" from the end of the manufacturing line to the final consumers. A second track, typically referred to as materials management, looked "upstream," backward from manufacturing and out across the supply base.
Both of them took an integrated approach to management that extended beyond the scope of a firm's traditional managerial concern, with a focus on cooperation and coordination across either the supply base or the go-to-market structure. The physical distribution concept was mainly attractive to companies in lower-value, consumer goods industries. The process of moving consumer products from the point of manufacturing or processing to retail stores, moreover, was similar across a great variety of industries. The materials management concept of integrating the supply base, on the other hand, had appeal for industries with a strong commitment to supplier innovation and valueadded performance. Research into this focal separation between inbound and outbound physical flow identified what is often called the "Great Divide": that point of separation between managing what is being sold and what is being made.
What was lacking, however, was the fusion of these two approaches into a broader concept of integrated management. In many companies, both types of organizations existed as separate entities. And even though gains were being made, many believed that some key benefits were being left on the table.
In 1985, NCPDM dropped the term physical distribution in favor of logistics, and it officially became the Council of Logistics Management (CLM). While there were many different motivations behind this move, at least some of the people involved saw the change as supporting a broader view of the physical movement of goods and materials from suppliers through to customers. The functional components of logistics were equally relevant to managing both inbound and outbound inventory movement and positioning. Few fully understood that we were on the threshold of developing the concept of supply chain management.
The 1990s: Collaboration extends the enterprise
For the emerging discipline of supply chain management, the decade of the 1990s was something like the first moon landing: a great breakthrough followed by a period of great achievement. Senior leaders embraced the challenges and opportunities of end-to-end integration by adopting the supply chain business model. Within that model, three important characteristics emerged:
1. The decade witnessed a head-on attempt to close the "Great Divide." Supply chain integration was positioned and extended to include customers and suppliers.
2. The concept of supply chain collaboration sparked an unprecedented level of integration that extended beyond traditional enterprise boundaries.
3. Supply chain alignment became a global concept extending across geographically separated customer and suppliers.
Integration across the total supply chain began to achieve the end-to-end efficiencies that many had anticipated. There were also some unintended, but positive, consequences. For one thing, increased connectivity allowed suppliers to become involved in new-product innovation. Moreover, companies that gained more end-to-end visibility began to tap expertise that previously had been excluded from activities that affected consumers. The result was not only greater supply chain efficiency but also major increases in effectiveness and customer relevancy.
As the decade unfolded, technologies that supported enterprise extension enabled senior leaders to develop new business models to guide supply chain integration. The earlier focus on cooperation and coordination was expanded to include collaboration.
Companies that collaborate for successful supply chain execution have three characteristics in common. First, they acknowledge their dependency. Second, they are willing to share strategic information. And third, they acknowledge and comply with cross-organizational leadership. As such, the supply chain organization that emerged by the late 1990s was clearly a new business model. In fact, it was everything Dr. Drucker had hypothesized and something more: It was a union of organizations collaborating in pursuit of shared goals.
In many ways, the conceptual framework of the supply chain business model developed faster than did its implementation. As the new millennium approached, concerns over Year 2000 (Y2K)-related technical performance raised dark clouds of concern. Many companies tried to leapfrog the technology challenge by adopting enterprise resource planning (ERP) systems. Their goal was to achieve integrated financials and end-to-end operating systems that would be capable of guiding supply chain globalization. Most got the financials they were after; few achieved end-to-end operational integration. The decade closed with serious questions concerning our ability to meet the global connectivity challenge.
2000 and beyond: Push comes to pull
A great deal has changed since 2000. The Y2K technology challenge was met. We learned the hard way what ERP is and, perhaps more importantly, what it is not. It also has become clear that the 21st century is characterized by disruptive technology; that is, technology that disrupts and puts in question what is considered to be best practice in a particular field.
This is also a period when event visibility and networked business structures are creating real-time connectivity that transcends the most complex supply chain structure. In addition, business leaders are increasingly aware of the challenges associated with digitization, or the reinvention of an enterprise in order to take full advantage of current and future technology. Most believe that such a transformation is far more extensive than traditional business process re-engineering.
This is not ordinary change management. Global supply chain management requires traditional "brick and mortar" firms to reinvent how they operate. Earlier standards of performance are giving way to new mandates, such as "perfect order" execution, rapid cash-to-cash conversion, and total product lifecycle management.
In fact, the whole time posture of business operations is quickly shifting from a forecast, or anticipatory, model to a highly interactive business model that is designed to rapidly fulfill precise customer expectations. This model, which responds to the "pull" of customer demand rather than "push" inventory out, is best viewed as a connected network of collaborating customer and business entities. These collaborative networks are devoted to achieving unprecedented levels of customer satisfaction through last-minute product and service accommodations. And they are increasingly exploiting technology to facilitate highly responsive business solutions.
Given the magnitude of the changes taking place around us, it was no surprise when CLM's leadership decided to once again seek a new name to better reflect what was happening around the globe. In 2005 CLM officially became the Council of Supply Chain Management Professionals (CSCMP).
New frontiers in supply chain management
So we return to our original question. Is supply chain management a discipline? In my view, the answer clearly is "yes." Supply chain management today is a highly developed discipline that is being taught and researched at almost all major universities. What's more, it is something companies test daily in the laboratory of global commerce.
As it stands now, in the 2007-2008 time frame, six imperatives combine to create the supply chain discipline. They are: (1) customer-centricity, (2) operational excellence, (3) integrative management, (4) real-time responsiveness, (5) network leveraging, and (6) collaboration. In combination, these imperatives frame the integrated supply chain business model.
In that supply chain business model we have a logical body of knowledge based on experience and experimentation. It provides a framework for predicting outcomes. But we are not finished constructing that framework; as happens in any emerging discipline, the frontiers of what constitutes supply chain management will continue to expand. New concepts and theories will emerge to replace old paradigms, and those that are capable of withstanding the challenges of time will form working constructs.
It is hoped that both research and prevailing practice will expand and, from time to time, modify our best thinking. As the Information Age continues to play out, we can expect new and more revealing insights into the structural framework—the genome, if you will—that makes a supply chain work best.
Where will this new discipline go next? How will it develop? Have we seen our greatest hour? These are questions with unclear answers. But more than 40 years later, I still agree with and believe Dr. Drucker's comments. And while I do not feel comfortable making specific predictions, I am convinced that the "Golden Age of Supply Chain Management" is still to come.
As we move more deeply into the Information Age, I foresee a day when we will fully capture the potential of many-to-many, real-time communication networks in the design of supply chain systems. Our attention will increasingly shift to implementing responsive supply chain solutions capable of exploiting extreme postponement strategies. I also believe we will continuously discover and implement environmentally friendly supply chain solutions based on our growing understanding of the importance of netzero environmental impact.
I will close by expressing one major concern. As an educator, I have concerns regarding what appears to be the growing separation of the academic and practitioner communities. The origins of our discipline were founded and grew on the strength of close bonds between industry and academia. Trust between these two important constituencies opened the doors of business to teachers and researchers, who were then able to gain a practical understanding of prevailing best practices and real-world needs. The research that followed was grounded in applied relevancy. Over the past decade, this has begun to change.
In a May 2005 Harvard Business Review article, "How Business Schools Lost Their Way," Warren Bennis and James O'Toole warn that academia has failed to meet the professional needs of managers who are dealing with the challenges of the Information Age. A great deal of the Bennis-O'Toole criticism can be traced to demands that professors publish in "select" academic journals, which some believe reflect proper academic rigor. Those teaching and researching the developing supply chain discipline have faced this dilemma for years. In the current "publish or perish" environment, even books that report groundbreaking research rank behind a "properly placed" academic article. Unfortunately, "proper" placement often results in articles that emphasize abstract issues and excessive quantification. These articles are published in obscure academic journals that most practitioners never see—or if they do see them, they do not read them.
I know full well that the state of academic publication is unlikely to change very soon. Thus there is a need for sponsoring, participating in, and supporting other, quality outlets for relevant academic research. I applaud CSCMP, which was founded on and grew from active collaboration between campus and industry, for launching Supply Chain Quarterly. This new publication, in combination with the Journal of Business Logistics and a few other respected journals, will offer our discipline a respected forum.
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