Before the industrial revolutions in Europe and the U.S., the vast majority of supply chains were local in nature and usually confined to specific regions. For example, in an agricultural supply chain, a farmer would cut the wheat, send it to a mill that ground it into flour, then to a baker who made bread from it, and finally it was sold at a market stall.
The industrial revolutions began to change things. The construction of railroads made it faster, easier, and cheaper to transport goods over greater distances, although supply chains were still limited to certain countries. In the 19th century, rudimentary handcarts and other tools made it easier to move goods. International maritime trade was quite inefficient, as loose goods were stored in the hulls of ships and loading and unloading required a great deal of effort.
Beginning with the invention of the internal combustion engine and the automobile in the late 19th century, pioneers began developing trucks to enable faster transportation of goods by road. The first semi-truck was invented in the late 19th century, and Mack Trucks was founded in 1900. Originally powered by gasoline engines, diesel engines were introduced in the mid-1920s. The early 20th century saw the first concepts for forklifts, which continued to be developed until 1930.
An important development for storage in the supply chain was the use of pallets in warehouses in 1925. This allowed goods to be grouped together on pallets, which could then be stacked vertically, saving space and making goods handling more efficient.
Logistics became very important during World War II as military organizations needed efficient supply chains domestically and in Europe. Domestically, supply chains were necessary to produce military equipment and supplies, while abroad it was important to get supplies and support to troops as quickly as possible. The 1940s saw a consolidation of industrial engineering and operations research into supply chain engineering.
The development of pallets, pallet handling and storage systems continued over the next several decades. The goal was to use storage space more efficiently and to optimize racking and layout. These changes were intended to streamline the loading, unloading, consolidation and handling of goods, resulting in faster deliveries and distributions.
Arguably the biggest revolution in global supply chains was the invention of the shipping container and all the logistics and transportation equipment it required. In our guide to containerization, we write, “The most important feature of the container is that it is intermodal – it can be easily transported by different modes of transportation. Whether a container is transported by truck on the road, by rail, or overseas on a container ship, standardization makes transporting and handling these containers quick and easy. That means cost and efficiency savings throughout the supply chain. Every minute saved translates directly into faster transfer of goods, less waste and environmental impact, and better profit margins.”
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Although shipping containers were not fully standardized until the late 1960s, the first shipping containers were invented in the mid-1950s. Around the same time, transportation companies began building vehicles that could carry these containers. The invention of containerization was a key driver in making global trade cheaper and more efficient.
In the 1960s, goods distribution shifted away from rail and toward trucking. Continued advancements in pallets, handling equipment, containers, and other areas meant that freight transportation became more reliable. This led to efficient transportation of time-sensitive raw materials, parts and products, even over longer distances.
Computerization took hold in the mid-1960s, and IBM developed the first computerized inventory management and forecasting system in 1967. Prior to the 1960s, logistical records and data were recorded, shipped, and reported in paper form. Computerization of data began to streamline logistics and created opportunities in many areas, including more accurate forecasting, better warehousing, truck routing, and better inventory management.
The first real-time warehouse management system was installed in 1975, making it easier to track orders, inventory and distribution, and leading to greater efficiency. Around the same time, bar codes made it easier to scan products and initiated a move away from manual entry of SKUs and product codes.
In the 1980s, supply chain players, transportation manufacturers, and others built on their successes. In 1983, the term “supply chain management” was coined, and the use of personal computers further revolutionized the supply chain. New software such as flexible spreadsheets, mapping and routing made it easier to control costs and maximize profits. Other advances included air freight optimization, supply chain distribution networks, and the introduction of enterprise resource planning (ERP) systems.
MIT also developed RFID tags to facilitate electronic tracking of goods and shipments, a precursor to the Internet of Things devices used today.
All of this history brings us to the present, where the transformation of global supply chains continues. One of the biggest influences is the explosion of manufacturing in Asia, where China, Japan and Korea have become major suppliers and exporters of goods. At the same time, AI and machine learning are being combined with predictive and prescriptive analytics to enable better forecasting, improved order management and more. In addition, the supply chain is evolving into a more data-driven, network-driven and collaborative supply chain ecosystem that creates real value and growth for all stakeholders.
Of course, there are still some challenges to overcome. Consumers and businesses are increasingly interested in the ethical aspects of sourcing and manufacturing goods, particularly with regard to environmental and labor rights. At the same time, supply chain managers need effective risk management to deal with the unexpected, whether it’s tariffs and duties, natural disasters or problems with global transportation.
Whatever the future holds, one thing is certain. If we apply the same innovations to global supply chains as we have in the past, we will continue to see greater efficiency, optimization and profit margins.
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