November 4, 2020
“Physical distribution is one of the most sadly neglected, most promising areas of American business,” said one writer in the 1960s. The coining of the term ‘supply chain management’ was 20 years in the future, and most people still only knew the word ‘logistics’ as it related to military operations.
While 2020 may have associated ‘supply chain’ with empty shelves and runs on hand sanitizer and toilet paper, the last 50 years have seen warehousing and distribution evolve from a neglected area of business to a field of study and significant investment.
Supply chain optimization, not a term in regular vocabulary yet, came in the form of pallets and the “unit load” concept to optimize warehouse space and layout. It wasn’t until the development of the shipping container by Malcolm McLean in the 1950s that the transportation of goods was revolutionized. The new container was intermodal, making transferring goods to different modes of transportation as simple as lifting the container onto a new mode, instead of hauling and securing goods at each pass-off point. Shipping became standardized, faster and easier, creating opportunities for cost and efficiency savings throughout the supply chain.
Physical distribution as a term that encompassed warehousing, freight and handling emerged as trucking, a more timely mode of transportation, became preferred over intermodal.
Computerization was becoming more mainstream, and IBM launched its first commercial database management system in 1967, built for NASA to track the millions of rocket parts needed for the Apollo 11 moon mission. Computerization of this data opened up the opportunity to streamline logistics for more accurate inventory forecasting and management and optimized warehouse storage and truck routing.
JC Penney installed the first real-time Warehouse Management System in 1975, around the same time that barcodes were becoming more mainstream. Inventory and order tracking was now significantly faster as warehousing and distribution moved away from the manual input of SKUs and product codes.
In 1983 ‘supply chain management” was coined when new software like flexible spreadsheets and planning tools were introduced, making ocean/air freight optimization and freight route planning possible. Costs related to supply chain were easier to track, as were profit maximization opportunities. Company executives started to see logistics as a way to get ahead in the market, recognizing it as a complex and expensive department that could improve the overall bottom line if properly invested in.
Japanese automotive manufacturer Toyota’s just in time production principles took hold in the U.S. as a result. Lean manufacturing’s ultimate goal was to minimize waste (both in inventory and in dollars) while maintaining high customer satisfaction standards. Companies invested in inventory forecasting and route optimization to determine how to reduce transportation and warehousing costs.
With the 1990s came the explosion of manufacturing in Asia, who soon became one of the U.S.’s major suppliers and exporters. Enterprise Resource Platforms also emerged, following the successes of other planning systems developed in the 70’s and 80’s, which could integrate the multiple databases that most companies had. More and better supply chain data was available as a result, and coupled with the globalization of supply chains, this data highlighted the need for logistics strategies that could handle complex, international networks.
Just in time principles carried through to 2020, partially causing the stockouts we saw in grocery and retail stores across the country this year. It remains to be seen how consumer behavior will change post COVID-19, and how supply chains will adapt to become more flexible and reactive. In the meantime, innovations in warehouse automation and robotics continue to set new standards for order picking and delivery speeds. Advanced integrative capabilities have also significantly progressed, allowing data and analytics across multiple systems to be available in real time, providing further opportunities for supply chain optimization and agility.
Stord is the supply chain in the cloud—empowering brands to build sophisticated, agile, and integrated supply chains. With a single integration between your enterprise systems to the Stord Supply Chain Cloud, you unlock a single view of inventory, order orchestration logic, audited data and analytics, and more. Backed by our network of 500+ warehouses, 30+ fulfillment centers and 20k+ carriers, use the Stord Supply Chain Cloud to request a shipment, launch a new warehouse or run new distribution models that help you out-deliver the competition. Let’s move supply chains to the cloud, together.