Brief history of ICT in supply chains (1970s)

JOS VAN HILLEGERSBERG: Welcome to this session on ICT and supply chain, a brief history. In this session we will look at the history of supply chains and how ICT has had a dramatic impact on innovations in the supply chain. It’s important for you to know about the history of supply chains and how it has evolved. Not only because this gives you the really broad scope that the supply chain manager needs, but also because you will see many of these history examples are still alive today. And as you work with other companies and other countries across the globe, you will see that many examples of the history are there and you need to understand them and where they come from.

We’ll cover the most important ICT innovations and what an impact they had on the supply chains. Imagine, less than 50 years ago, what a supply chain department looked like. Think of a retail store, think of warehouses, think of planning departments, of forwarders, of transportation companies. Think of what supply chain departments looked like less than 50 years ago. They were completely different than today. Paper flows were dominating the work. People need to handle planning, they need to handle forecasts, they need to make calculations. They were handling huge piles of orders and bills of loading, all on paper. This was all needed to plan production, to plan deliveries, to monitor cargo, to get customs approval. All this was done on paper.

And this required a tremendous effort. There was very little technology in place and I can remember even that I visited companies, not too long ago, where a huge task was filling in forms and even sending out couriers to get stamps at certain authorities and drive back with the paper forms. So there was very little technology in place and this really hindered the work of supply chain managers. So there’s a huge opportunity for technology to produce better supply chain insight and better supply chain processes. It was very hard to answer customer questions– where are the goods, what is the current status of goods, how long does it take for us to deliver certain goods, what is the level of stocks?

All these kinds of questions required a huge amount of work. The technology used at that time mainly consisted of fixed phone lines, paper orders, telegraph, faxes, people that would run around with these kind of documents and tried to get inside. And a lot of the communication was handled by people over the phone. You can imagine how inefficient and how troublesome this was. Here you see an example of a letter of loading– a cargo letter from the 1960s. You can see the different parties that would handle the cargo in the supply chain would add information to this document, would add stamps, would add signatures, would authorise it. And you can imagine how error-prone this is.

This Is the same for contracts, for transport letters, for invoices. Everything was basically handled by multiple parties and, also, it needed authorisation and needed to be secure. Multiple parties needed to have copies of these documents. So this cost a lot of manual work. A lot of errors could be caused by that. And it was very hard to do real management as you had no insights into, let’s say, aggregated level of information. You were simply too busy handling all these detailed documents. You can also imagine that in case of disruptions in the supply chain, or exceptions, certain events that happened that would require changes, it is very hard to really take action as you are continuously dealing with these paper flows.

That was the situation not even that long ago. Now let’s look at some really big changes that came from the ICT technology domain. And let’s take these by decades. In the 1970s we see some really important technologies from ICT that were discovered and that would have a great impact on supply chain management and the supply chain management field. The 1970s saw the first computing technologies that became affordable to large groups of people, to large groups of companies. Think of the introduction of companies we know today and how it’s very dominant in technology space– Apple, Microsoft. Think of the first word processor software, Wordstar. Or the first spreadsheet, Visicalc, introduced in 1979.

Think of technology such as laser printers that were pioneered then in the laboratories. Also, large technologies pioneered in the military space helped supply chains later. A famous example is the Global Positioning Network, GPS, which was a military technology developed in the 1970s. But it was later opened up to business and public and, as you can imagine, this meant really a huge improvement to supply chain processes. And this allows us to track goose all over the globe. Another really important milestone– some consider it one of the most important milestones– is the standardisation of product codes. And at the same time, the introduction of the barcode.

These machine readable formats really allow the machines to track the products and reads product codes so much faster than the manual processes before this. And it may be hard to imagine, as we are so familiar now with barcodes, that it was in the 1970s that it required a huge effort and a huge amount of money to get the technology in place to accurately read barcodes and to really scan a barcode in a reliable way so that the product code could automatically be read. Now we see them all around us. The UPC, Uniform Product Code, and standards like European article numbering that help companies really to track the products through the supply chain.

A milestone in the impact of ICT on the supply chains was the day, 26 of June, 1974, that the first product, a package of Wrigley gum, was scanned at a cash register in a retail store. And we know, since then, this has become the standard all around the world. And every day, billions of products are tracked automatically using the UPC and the barcodes. But really, in the software domain, also a lot happened that would really change supply chain a lot. In the early 1970s, the company SAP was founded. SAP was originally a project at IBM, basically to help companies to administer financial processes and later production processes.

As IBM was not really into that space at that time, they started their own company in Walldorf, Germany. The first version of SAP– R/1– we would today consider very simple, very primitive. But what was already interesting is that it was real time software. So it would really depart from the, let’s say, batch procesing that at that time was common and tried to get more real time inside in a number of business functions.