Global supply chains have been extremely pivotal in the development and operations of worldwide commerce. Every supply chain involves underlying important logistics tasks that cover issues like receiving, sending, moving, storing, and maintaining goods. Both logistics and the supply chain are essential for the success of any organisation. Therefore, it’s not surprising that people often get confused between “supply chain management” and “logistics management”. These terms are often, albeit wrongly, used interchangeably.
While these terms and operations have some similarities, they are very different. The most straightforward distinction between the two terms is that a supply chain refers to a broader entity that engulfs all the overall processing, sourcing, and delivery of goods. On the other hand, logistics is focused more on the movement and storage of goods between different supply chain end-points.
In this article, let’s look at what is logistics, what is supply chain management, and what are the differences between Logistics and SCM.
What does ‘Logistics’ mean?
In formal terms, logistics can be defined as that part of the supply chain that is responsible for all the planning, implementing, and controlling of the flow of goods from the point of origin to the destination. Logistics is responsible for all the maintenance and management of goods, storage locations, etc. Logistics includes packaging, transporting, warehousing, and other similar tasks that are more concerned with moving and placing goods all across the supply chain.
The primary objective of logistics is to ensure that the end customer receives the correct product at the right time, without any damages or compromises. Logistics can be further divided into inbound logistics and outbound logistics.
Here are some of the key characteristics of logistics:
- Logistics forms a part of a bigger, end-to-end supply chain process.
- Logistics involves the planning, implementing, and controlling of goods and their movement.
- Logistics moves goods and materials from place to place while keeping them secure and preserved, without any compromises.
- Logistics takes care of storing all the goods as and when required until they are needed to be sent elsewhere.
- Logistics takes the goods to the destination point and provides it to the end customer by offering “last-mile delivery”.
What is meant by Supply Chain Management?
Supply chain management is the collaboration between different firms, companies, and organisations that act as suppliers, customers, and partners, to enhance efficiency and produce superior value for the end consumer. While logistics activities were more concerned with the movement and storage of goods and products, supply chain management relies more on strategic decision making and creating operational frameworks within which logistics can be successfully and efficiently performed.
Supply chain management becomes possible only after collaborating efforts of different organisations that manage the flow of materials and ensure seamlessness. Therefore, supply chain managers are deep generalists who work with different teams and functions to ensure all the requirements are met. Logistics, in this sense, is a subset of any supply chain network.
Any supply chain works with the collaboration of the following distinct parties:
- Suppliers: responsible for producing raw parts or materials that can be moulded into products.
- Manufacturers: responsible for turning raw materials into products and other valuable parts.
- Logistics: responsible for transporting and storing goods as they move through different touchpoints of any supply chain.
- Wholesalers: responsible for purchasing goods and starting the distribution process to other sales outlets.
- Retailers: responsible for bringing the finished goods to the end-users.
While the tasks of logistics are pretty much limited, supply chain management often controls various vital aspects of the order and inventory. Here are some such benefits good supply chain management provides:
- Fosters healthy partnerships and collaborations.
- Simplifies and streamlines inventory management.
- Removes hassles and confusion from order management.
- Simplifies orders, assets, and shipment tracking processes.
- Increases visibility and provides transparency.
- Gives a chance for easy troubleshooting in case of any issues.
Key differences between Logistics and SCM
It is essential to keep in mind that while these terms are not interchangeably, they are often supplementary. Both are needed for the successful working of any global commerce organisation. With that said, here are some points of differences between supply chain management and logistics in no specific order:
- SCM helps link different business processes across different companies and turns the entire process into a high-performing model for the company’s advantage.
- Logistics is all about the movement, storage, and maintenance of goods and services within and outside the organisation.
- A supply chain is more strategic, so its main focus is on providing a competitive advantage to the company. On the other hand, the main focus of logistics is to keep things smooth to meet the customers’ requirements on time, without any bottlenecks.
- The term ‘logistics’ has been around for a long time, from the military age. On the other hand, supply chain management is a relatively new term.
- A supply chain is an overarching term, and logistics falls within the umbrella of all the supply chain activities.
- SCM takes care of all the planning, implementation, and storage of goods between source and destination. Contrarily, logistics cares more about delivering the final product to the end consumer at the right time.
- Talking about the processes involved, Logistics deals with inbound and outbound transportation, reverse logistics activities, warehousing, packaging, and maintenance. On the other hand, SCM includes broader tasks such as supply and demand planning, freight procurement, enterprise resource planning, logistics planning, inventory management, manufacturing optimisation, etc.
- In terms of the software used to accomplish various tasks, Logistics uses traditional transportation management systems, warehouse management systems, and other software to check inventory. SCM works with solutions and software like ERP, CRM software, and other analytics powered software to make strategic decisions at the right time.
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