When we say "supply chain management" we tend to think of it as managing physical things, i.e., raw materials or parts, which are then manufactured into products, which are then distributed.

But in the 21st century, supply chain management is really about managing information. Today, it is only when businesses master information that they can manage physical objects more efficiently.

As the graphic accompanying this post shows, supply chain management means getting the right things to the right places at the right times. Getting more information and being able to put that information to use quickly is precisely how businesses get the right things to the right places at the right times.

A white paper by an official at the Federal Reserve Bank of Dallas (PDF) points out why managing information is the key -- today -- to improving efficiencies and driving down costs in business supply chains:

Supply Chain EvolutionThroughout history, new ideas and technologies have revolutionized supply chains and changed the way we work. Two hundred years ago, giant mechanical machines replaced labor to complete tasks in large factories. Railroads, electricity and new communications mediums expanded markets and also made supply chains better, faster, and cheaper.

Then, in the early 1900s, Henry Ford created the first moving assembly line, utilizing scientific management methods. This reduced the time required to build a Model T from 728 hours to 1.5 hours, and ushered in the mass production era. Over the next 60 years or so, American manufacturers became adept at mass production with the help of many operations research techniques.

But in the 1970s, U.S. manufacturing's superiority was challenged by lower costs and higher quality products from foreign firms in many industries. Global competition forced U.S. manufacturers to concentrate on improving quality by reducing defects in their supply chains.

Starting in the early 1970s, Japanese manufacturers like Toyota changed the rules of production from mass to lean. Lean manufacturing focuses on flexibility and quality more than on efficiency and quantity. Significant lean manufacturing ideas include six-sigma quality control, just-in-time inventory and total quality management.

Today, businesses are improving their supply chains through better information engineering. Since about 1995 -- around the time of the commercial application of the Internet -- we have been in the mass customization era. Now, manufacturers can mass-produce customized products. It's no longer "you can have any color Model T as long as it's black."

Firms are effectively using new information technologies like the Internet and wireless telecommunications to improve service and delivery processes. Through secure intranet systems and business-to-business (B2B) e-commerce platforms, the focus is on improving information management: integrating internal systems with external partners -- like Amazon's practice of giving customers the ability to track the delivery location of their purchases through Amazon's website. Or Wal-Mart's routine practice of sharing all sales data in real-time with its upstream suppliers and manufacturers.

The paper goes on to develop a cause and effect scenario between information technologies (especially the Internet), improved supply chains, and the productivity gains of the past decade.

Significantly, it also points out the transformational potential of information technologies like RFID on the future of businesses' supply chains. Because in the end, RFID is simply about getting more information -- and getting it faster and more efficiently and at the right times.

Although this white paper is written from the perspective of the United States (after all, it is written by a central bank official) it holds insights and lessons for other world economies.

It is an absorbing read, and if you needed any proof of the powerful potential that RFID holds for businesses and for the global economy, this paper is it.