The Supply Chain concept was introduced to tackle two important issues: Chain of distribution liability and costs
Chain of distribution liability:
Before the Chain of Distribution Liability was introduced in the Netherlands at the end of the 80ties, the last shackle in the chain was responsible and liable for all damage that occurred. In the food chain this led sometimes to excesses and extreme quality defects. The liabilities required extensive input control measurements by the end producers and Retail Channels. Because if you do not know what to look for, every possible possibility has to be tested.
With the introduction of chain of distribution liability, every parts- or component-producer is responsible for the quality of its product and has not only to guarantee that his product is free from defects, but is also liable for all damage that occurs downstream. This resulted in a dramatic decrease of cost throughout the supply chain and liabilities.
The major trigger for the cost revolution in the retail chain in the Netherlands was the introduction of Direct Product Costs (DPC) and Direct Product Profitability (DPP) by Albert Hein in 1985
Retail distribution and DPC and DPP
DPC (Direct Product Costs) = shop handling costs + direct storage costs + direct space costs + direct transportation costs.
DPP (Direct Product Profitability) = procurement price + margin -/- DPP
This triggered a revolution in logistics and packaging.
In logistics: remote order entry and day to day order picking was introduced, reducing storage space costs at the retail shops by increasing product space on the shops floor.
In packaging: waist reduction in transport packaging by the introduction of retail ready packaging directly from a trolley on to the shelf.
Both concepts, Chain Liability and Cost reduction based on the principles of DPP and DPC, I applied in other industries, Large administrative processes, Projectmanagement, Data warehousing and other IT-projects, because all products can also be defined as sets of information and vice versa.