LogisticsWeek

The idea of logistics has expanded over the years to become the interesting, all-encompassing entity – supply chain – that it is today. Padmini Pagadala explores the two terms.

What’s in a name one may ask? We may shrug off the discussion, but not so the experts in our industry. Recently, I was at a cocktail party with some international veterans from our industry, and they started talking about what the right word was to refer to the industry we work in. They discussed the subject with so much vigor and argued back and forth, that I thought it would be valuable to recount their conversation. More than that, it’s important because I think it shows how the field has evolved.

What’s interesting for me as a relative newcomer to this field is that we haven’t always been called supply chain professionals. According to these “veterans,” our profession has really changed its name three times over in the last 50 years or so. It wasn’t until the beginning of the new millennium that our recent name change to supply chain professionals took place.

Why did the change take place? As we in India follow the supply chain evolution path that the West has mapped, it’s worthy to consider each step and whether or not that step was really necessary or relevant. The biggest mistake we can make is copying for the sake of copying. It strikes me that sometimes even the logistics terms used might not transfer as well as the practices.

The Beginning

Most of you would be familiar with the Council of Supply Chain Management Professionals (CSCMP). The CSCMP is the world’s pre-eminent organization of supply chain professionals . There are thriving chapters of the organization in Mumbai and Delhi. But, what most readers may not be familiar with is that in the very beginning in 1963, when the founders came together to set it up, that’s not what they called it.

To begin with, Art Vanbodegraven, who has been in the industry all his life as a practitioner and consultant, talks about the inception of the industry in the following way:

“We began as Traffic Managers and warehousemen (There were no women in those days). Our world was narrowly defined as the processes involved in getting goods from point A to point B (and sometimes point B was a place where goods were stored for relatively long periods of time). The current area of work that is known as supply chain was referred to as ‘physical distribution’ in the 60s. At that time, we banded together as the National Council of Physical Distribution Management (NCPDM).”

Shift In Focus

Came the 70s and most corporate income statements took a hit as oil suddenly became a limited and expensive resource. This was also the time when Japanese products hit the markets and swamped them– and brought notice to quality. Capital became expensive. Toyota had used kanban for more than a decade. Manufacturing stepped up their efficiencies. As Jim Apple, the renowned US materials handling educator and consultant (and one of my partners in the US) told me, the focus of the field changed from how to fill orders properly and maintain accurate inventories inside warehouses, to transportation planning, facility location and inventory reduction.

Fortunately, as Ralph Ehmann from the warehouse design firm Ideen Werden Loesungen (IWL) in Germany points out, computers became available to help answer these questions. Physical distribution was no longer the need of the hour and neither was it the right term to describe the various activities it encompassed.

The term ‘logistics’ (a description used initially by the military to describe deployment and provisioning of equipment and supplies) began to gain popularity in line with new thought processes on the subject and the fact that, as Ehmann points out, “logistics cares about the material and information flows of a company.” The term caught on as many realized it was a “whole new world”. So big was this realization that in 1985, what was then known as the NCPDM changed its name to the Council of Logistics Management (CLM), in response to the new ideas which were evolving on logistics. Amazingly, trucking firms such as ‘Todd Distribution’ became ‘Todd Logistics’ almost overnight, recalls Steve Mulaik of TPG in Atlanta. Some had no idea why they needed to change their name other than that they had to stay on the bandwagon.

Expanding The Network

It has generally been thought that ‘logistics’ meant just the movement of goods as well as information about your own firm. But the experts started to bring notice to the fact that around the turn of the 20th century, there were things that needed to be done beyond one’s own manufacturing plants, distribution centers, transportation network and information systems – if costs were to be driven down further.

Companies had to reach out to their suppliers and customers and build relationships. What also changed drastically with the turn of the century was that one’s manufacturer was no longer just 200 miles away. He could be millions of miles and oceans away. With the boom in e-commerce, the same could be said about the clientele. Also, a whole new set of activities encompassing but not limited to procurement, waste management, forecasting and demand planning were recognized as being part of the f ield as the tradeoffs between purchase cost, inventory levels, transportation, and warehousing costs started to be talked about. There began a ‘far and beyond’ and the term ‘logistics’ was no longer enough.

Interestingly, I graduated from The Logistics Institute (TLI) at Georgia Tech. Today, if you walk into TLI, you will find that it has been renamed ‘The Supply Chain and the Logistics Institute’. My professor from Georgia Tech simply mentions that ‘logistics’ is no longer en vogue.

The CLM changed its name to CSCMP in 2005. Rick Blasgen, none other than the President of CSCMP, recalls the reason for the name change. “With broader emphasis on the entire supply chain, CSCMP will provide its members with enhanced content that incorporates not only logistics, but also procurement, manufacturing operations, sales and marketing functions.” And so was invented the term, supply chain.

To make things clear briefly: Distribution, warehousing, transportation are all a part of logistics, which along with demand forecasting, waste management, supplier relationships and the rest of the gamut is called supply chain. As food for thought, if you are an Indian manufacturer serving clients outside India, think about the capabilities you need to develop in order to create a local market. On the other hand, if you are a cottage industry, think about the challenges you need to face in order to be able to reach out to clients across the country. The evolution from physical distribution to logistics to supply chain was the path traced by the practitioners who expanded the scope of their jobs to take on wider and more integrated responsibilities. It is an absolute requirement if you want to reduce end-to-end time delivery, improve service, quality, and minimize costs. Think about it.

The author can be reached at padminimp@theprogressgroup.com.