Global Trade Management
Looking Back: The World's First Global Supply Chain

The city of Ternate in eastern Indonesia seems forgotten by time.

Its quiet bustle is confined to the coastal fringes of Mount Gamalama, with its imperious presence. The most prominent building in the low-slung city is a monumental new mosque, minus two of its four minarets that fell down in a recent earthquake. The seat of provincial government has been moved onto the larger nearby island of Halmahera.

The stone skeletons of four substantial forts, however, bear witness to a turbulent past. Ternate was the legendary spice cornucopia that Portuguese sailors set out to find. Here grew fragrant cloves, and the Sultan also exercised sovereignty over the Banda Islands to the south, the world's sole source of nutmeg. For centuries Arab traders had brought these spices to the Middle East, with Venetian middle-men taking them onwards to Europe, at huge mark-up. When the Portuguese discovered the trade route via the Cape of Good Hope, the way was open for them to collect their own spices direct from the Sultan of Ternate, who became their treaty ally. They went on to establish their trading entrepôt at Malacca early in the 16th century to oversee the spice trade: 'Whoever is Lord of Malacca has his hand on the throat of Venice.'

But directly commanding the source of the spices was better than a deal with a fickle sultan — hence the battles for possession of Ternate and the other spice islands over the next several centuries. Everyone was here, battling it out for influence and cargoes: the Spanish, the Dutch, and the English. Magellan's surviving commander on his pioneering voyage around the world passed through here, as did English privateer-hero Francis Drake.

Here, surely, was a very early, fully operational manifestation of international integration, the embryonic form of today's ubiquitous globalisation. We would recognise its constituent elements. Here was the tenuous but well-structured supply-chain, extended all the way from Banda to Amsterdam, via numerous ports and functionaries, administered with brutal efficiency by the Dutch East India Company, perhaps the first business organisation that bears resemblance to today's multinational corporations. The company raised money by issuing shares. It had the first widely-recognised commercial logo. Even without today's computers, the company's officials were linked through a hierarchy of regular detailed reporting and accounting. Production was brought together in plantations and processed in 'factories.' Near-subsistence agriculture was replaced with scale and quality control, supervised by the perkeniers with an incentivising profit-sharing deal with the company. Customer feedback was insistently relayed to producers: 'Small nutmegs are of no value.'

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Its quiet bustle is confined to the coastal fringes of Mount Gamalama, with its imperious presence. The most prominent building in the low-slung city is a monumental new mosque, minus two of its four minarets that fell down in a recent earthquake. The seat of provincial government has been moved onto the larger nearby island of Halmahera.

The stone skeletons of four substantial forts, however, bear witness to a turbulent past. Ternate was the legendary spice cornucopia that Portuguese sailors set out to find. Here grew fragrant cloves, and the Sultan also exercised sovereignty over the Banda Islands to the south, the world's sole source of nutmeg. For centuries Arab traders had brought these spices to the Middle East, with Venetian middle-men taking them onwards to Europe, at huge mark-up. When the Portuguese discovered the trade route via the Cape of Good Hope, the way was open for them to collect their own spices direct from the Sultan of Ternate, who became their treaty ally. They went on to establish their trading entrepôt at Malacca early in the 16th century to oversee the spice trade: 'Whoever is Lord of Malacca has his hand on the throat of Venice.'

But directly commanding the source of the spices was better than a deal with a fickle sultan — hence the battles for possession of Ternate and the other spice islands over the next several centuries. Everyone was here, battling it out for influence and cargoes: the Spanish, the Dutch, and the English. Magellan's surviving commander on his pioneering voyage around the world passed through here, as did English privateer-hero Francis Drake.

Here, surely, was a very early, fully operational manifestation of international integration, the embryonic form of today's ubiquitous globalisation. We would recognise its constituent elements. Here was the tenuous but well-structured supply-chain, extended all the way from Banda to Amsterdam, via numerous ports and functionaries, administered with brutal efficiency by the Dutch East India Company, perhaps the first business organisation that bears resemblance to today's multinational corporations. The company raised money by issuing shares. It had the first widely-recognised commercial logo. Even without today's computers, the company's officials were linked through a hierarchy of regular detailed reporting and accounting. Production was brought together in plantations and processed in 'factories.' Near-subsistence agriculture was replaced with scale and quality control, supervised by the perkeniers with an incentivising profit-sharing deal with the company. Customer feedback was insistently relayed to producers: 'Small nutmegs are of no value.'

Read Full Article