Understanding the Difference between Logistics and Supply Chain Management
Introduction
Organizations rely on supply chains and logistics to ensure goods are delivered to customers in a timely manner. These systems are what ensures customers receive goods within a certain timeframe and with the best possible service. The terms are often used interchangeably. But there are some key differences you should know.
Logistics focuses on the movement and storage of goods within the supply chain. Supply chain management (SCM) focuses on each stage in the supply chain, from manufacturing to delivery. Put simply, SCM is a broad term and logistics is only a small part of it.
The key differences between supply chain management and logistics are scope, focus, timeframe, and goals. Logistics also focuses on the customer’s needs while SCM is more concerned with creating a competitive advantage.
Understanding the difference can help you make better decisions at every stage of the product journey. It can also help you identify problems in supply chains and put solutions in place to rectify them. This article will briefly explain each term and help you understand the difference between them.
Logistics Management
Sometimes called supply chain logistics, logistics management is acquiring, storing, and transporting goods from their original location to their final location. The main aims of logistics management are to help organizations reduce overhead costs and improve customer satisfaction. Similar to supply chain management, it is also made up of several components.
Logistics can be further broken down into outbound logistics and inbound logistics. Outbound logistics covers the distribution and delivery of goods to the customer. Inbound logistics covers the handling and storing of goods before they reach the customer.
The main components of logistics management are planning (storage, warehousing, and materials handling), packing, inventory management and control, transportation, and information and control.
Understanding each component can help you recognize how it fits into the wider supply chain. Each separate component helps to create a sense of consistency across the movement of goods.
The role of logistics management in the global supply chain is fairly straightforward. It is what ensures goods traveling along the supply chain are delivered from A to B. It also determines how goods are acquired, sorted, and transported to the customer.
This includes a number of processes such as order processing, warehouse management, inventory management, and transportation. Packing, demand planning, and information and control also play a vital role.
Supply Chain Management
Supply chain management (SCM) is the management of goods from order to fulfillment. In other words, the journey of goods from acquiring raw materials to customer delivery. The main goals of effective supply chain management are to streamline business operations, maximize customer satisfaction, and gain a competitive advantage in the market.
Supply chain management works by incorporating five main components: planning, procurement, production, distribution, and returns.
The planning stage refers to the development of the supply chain strategy. The other stages help to put the strategy in place. Breaking down supply chain management into components can make it easier to manage.
The journey of goods along the global supply chain is a complex process. But successful supply chain management can help businesses maximize customer demand and profits. By reducing overhead costs and ensuring products meet customer requirements, supply chain management professionals can also save time and money.
Key Differences between Logistics and Supply Chain Management
Supply chain management and logistics are commonly confused. This is because they intersect at various points along the supply chain. However, there are also some major factors that can help you tell them apart. The key differences are scope, focus, timeframe, and goals.
For example, the scope of supply chain management is far larger than the scope of logistics. This is because logistics only make up a portion of a collaborative supply chain network. Supply chains include the entire journey of goods from sourcing supplies to customer delivery. Logistics, however, only includes a portion of this journey.
Similarly, both terms also have a different focus. The main focus of supply chain management is to gain a competitive advantage over other businesses within the same niche. The main focus of logistics is to maintain customer satisfaction by delivering goods quickly and efficiently. Both of these factors contribute to successful supply chain management.
Because both terms focus on different points of the supply chain, they are subject to different timeframes. Generally, logistics only deals with short-term planning and execution to ensure goods are delivered in a timely manner. Supply chain management, however, deals with both short-term and long-term planning but mainly focuses on achieving long-term results.
Finally, both terms also have different end goals. Logistics focuses on the needs of the customer and ensuring customer retention. Supply chain management is more concerned with how the company’s performance compares to its competitors. This is done through the procurement of raw materials and offering goods at competitive prices.
The Interrelationship between Logistics and Supply Chain Management
Supply chain management and logistics are completely different terms but they do overlap. For example, both terms focus on the journey of goods from the moment it enters the supply chain to the moment it is delivered to the customer. Both terms also require similar processes to ensure goods move along the supply chain as intended.
Other similarities are that both terms aim to help the business thrive, improve customer service, and focus on the supply of goods. However, supply chain management includes the entire process from start to finish. Logistics only comprises a small part.
Logistics are responsible for the efficient movement of goods through the supply chain. This includes the transportation of goods from the original location to the final destination. It also includes the storage of goods at every step of the way until they can be safely delivered to the customer. These steps are crucial for successful supply chain management.
From order processing to information and control, logistics plays a large role in supply chain management. However, supply chain management also plays a central role in logistic management. Because logistics is part of the wider supply chain, logistics management is only possible through successful supply chain management.
For example, logistics can only deliver goods on time if the supply chain is operating as it should. Similarly, customers will only return if the entire journey, from order to delivery, has been handled quickly and efficiently.
When to Use Logistics vs. Supply Chain Management
Understanding the difference between logistics management and supply chain management can help you make better decisions at every stage of the supply chain. This can also save your organization time and money by focusing on the right things. But what is the difference between logistics and supply chain management?
Put simply, supply chain management refers to the journey of goods from the sourcing of raw materials to the final delivery destination. The main aim of supply chain management is to gain a competitive advantage over competitors in the market. Logistics refers to the maintenance and storage of goods. The main aim of logistics is to ensure customers are happy.
Knowing how to differentiate between both terms can also help you know which to use. Logistics is used when referring to the storage and handling of goods until they reach their final destination. Supply chain management is used when referring to the entire journey of goods from start to finish.
For example, you would use logistics when discussing anything to do with planning, transportation, inventory management, material handling, and order fulfillment. Alternatively, you would use supply chain management when discussing anything to do with the coordination between partners within the supply chain network.
Knowing when to use each term can be difficult but applying them to real-world situations can help you better understand what they mean.
Conclusion
In the supply chain industry, logistics is often confused with supply chain management. However, while there are similarities, both terms are very different. Supply chain management refers to the entire supply chain process. In other words, from the moment raw materials are sourced until the moment the customer receives the order.
Logistics is a subsection of the supply chain process. It mainly focuses on the movement and storage of goods. It is also concerned with ensuring the customer is satisfied with the product and the customer service received. Understanding the difference is important because it can help you make better decisions and improve the efficiency of the overall supply chain.
Logistics can be optimized in a few simple steps. By focusing on shared visibility, sustainability, digital solutions, KPIs, and customer demand, logistics providers can overcome industry challenges. This can also help them provide a better and more efficient service for customers.
Supply chain management can also be optimized in a few simple steps. Focusing on outsourcing, supply chain management software, planning, and analytics has been proven to lead to efficient supply chain management. Using these techniques can ensure supply chains are achieving global supply chain visibility. It can also improve revenue and market share.
FAQs
What is the difference between logistics and supply chain management?
Logistics is often mistaken as being the same as supply chain management. However, there are some key differences between both terms. Logistics refers to the storage and movement of goods within the overall supply chain. Supply chain management refers to the entire supply chain process.
What challenges are commonly faced in logistics and supply chain management?
Logistics management and supply chain management can help a business thrive. But they’re not without their challenges. The challenges commonly faced in logistics are increased transport costs and handling customer expectations. The challenges commonly faced by supply chain management professionals are unexpected delays and material scarcity.
Sources
https://www.gep.com/blog/technology/supply-chain-management-how-to-overcome-challenges
https://www.blumeglobal.com/learning/differences-between-supply-chain-and-logistics/
https://www.techtarget.com/searcherp/definition/logistics-management