The History of Global Supply Chains

Supply chains have experienced huge changes throughout history to get to their current level of efficiency. From the inventions of vehicles to the take-off of computerization, the journey from part to product has changed. Let’s take a look at where global supply chains began, as well as the developments that have impacted supply chains through history, and how these have shaped the world we live in today.

The early days

Long ago, goods had to be assembled close to the source of the raw materials, due to transportation and cost factors. These goods had a linear chain to reach the end consumer, using ancient trade routes such as the Silk Road through Central Asia and the Spice Route over the Indian Ocean as examples The first example of production with a ‘truly global supply network’ was most likely rum. The supply chain started with slaves who were moved from Africa to the Caribbean to grow the sugarcane, which came from India, and it ended in distilleries in the US, as well as being exported to Europe. The majority of items were produced and consumed locally at this time, allowing for widespread communication and customization between producers and consumers.

Late 18^th century- mid 19^th century

The first industrial revolution began in England, spanning from around 1760-1840. This time period was largely characterized by the mechanization of production and the use of steam power, with developments allowing for faster and more voluminous production. The textiles industry largely shifted due to the technological innovations. The spinning jenny, invented by James Hargreaves in 1764 allowed a machine with many spindles of thread to be spun at one time. As well as this, Edmund Cartwright developed the power loom in 1785 which allowed for quicker production of cloth. These inventions amongst others mechanized the textile industry and led to the establishment of factories throughout Britain, which was the first country to industrialize. India was previously the cotton center of the world, exporting its produce globally, however the industry shifted due to the improvements in ship design and the introduction of the steamship in 1813 which allowed a global supply network to emerge, with more options of importing cotton and other materials becoming available. Cotton was grown in the U.S. which was then shipped to the rest of the world.

Mid-19^th century- early 20^th century

The second Industrial Revolution, sometimes referred to as “The Technological Revolution” took place from 1850-1914, occurring mainly in Britain, Germany and the United States. Developments to note from this time period include the beginning of electrification and large-scale iron and steel production, as well as the start of the telegraph. Mass production, introduced by Henry Ford in 1913 led to product standardization.

The expansion of transport networks, including the development of railways in 1860 also had a massive impact on the world. A major breakthrough for global supply chains was the opening of the Suez Canal in 1869, a vital shipping route connecting Europe and Asia. Today, an average of over 300 million tons of cargo is carried through the canal per year. Another vital shipping canal, the Panama Canal was officially opened in 1914, allowing for trade between the Atlantic and Pacific Oceans. As a result of these shipping developments, the cost of transporting goods dropped significantly. Ocean freight rates, for instance, fell 70% between 1840 and 1910.

Mid-20^th century- late 20^th century

By the 1950s, a new generation of technological advancements were able to influence the structure of global supply chains. Containerization was a major innovation during this time period. Until the mid-1900s, ships had to be loaded piece-by-piece, which was extremely inefficient. This meant there were opportunities to revolutionize shipping and logistics. Entrepreneurs such as Malcom McLean introduced standardized containers which could be easily loaded into ships, but also easily transported through the rail and truck network, which reduced time, costs and improved overall efficiency. Asia decided to fully adopt containerization and build new facilities, whereas some Western locations decided to continue building traditional style ports. This decision led to Asia being home to the world’s largest container ports by 1990, Hong Kong and Singapore, which still dominate the industry today.

Communications were also enhanced during this time period. Although the telephone was patented in 1876, phones were not common in the United States until the 1920s. Improved communications meant it was possible to specify exact requirements, and the help from containerization meant things could be delivered “just-in-time.” Lean manufacturing stemming from Japan shaped the world of production, especially in the automobile and electronics industries.

This time period was a decade described as the “Communications Revolution”, with the internet and telephones becoming ubiquitous.  Computerization started to gain popularity in the mid-1960s and IBM developed the first computerized inventory management and forecasting system in 1967. The development of software systems enabled many management processes such as enterprise resource planning, inventory management, shipping logistics, product flow scheduling and tracking, which are relied upon today.

The 21^st Century

Thanks to the developments from previous centuries, supply chains have now reached Industry 4.0, or the Fourth Industrial Revolution, which is a major part of any company’s digital transformation. This revolutionizes the automation, monitoring and analysis of supply chains through smart technology. In total, there are nine technology pillars on which Industry 4.0 is based: big data, horizontal and vertical integration, AR, IoT, additive manufacturing 3D printing, autonomous robots, digital twins and cybersecurity. These technologies allow “smart” products to be created and processes to be integrated, which in turn allows for higher productivity. These developments changed the way companies operate, because as cloud manufacturing opens up new working practices, automation becomes more common.

Closing thoughts

The story of global supply chains and the paths they have taken to reach their current point in 2022 is rather remarkable. Although external factors such as the pandemic can have a huge impact on the structure and operation of supply chains, they are more robust than ever and will continue to improve. So when will Industry 5.0 happen and what will it look like? Nobody knows exactly, but one main objective will be to advance the collaboration between humans and machines as a response to increased customization in products. Whatever the future holds, if the same level of innovation is applied to global supply chains as it was in the past, then we will see further efficiencies, optimization and profit margins.