Differences, Similarities, and Roles Between Supply Chain Management and Logistics
Many people confuse logistics with supply chain management, going so far as to use the terms interchangeably.
However, the two have several key differences, despite logistics playing a key role in managing your supply chain.
This article sheds light on those differences, in addition to discussing the similarities between supply chain management and logistics that create so much confusion.
What Is Supply Chain Management?
Supply chain management refers to the entire journey that goods or services take to get from your company to the client. This journey starts with the raw materials you use to make the product, through to manufacturing, and on to how you deliver that product to the consumer.
To facilitate this journey, you’ll create “links” in your supply chain, hence the “chain” aspect of the name. For example, the suppliers who provide the raw materials for the goods you create are links. So too are the companies you use to shuttle your goods to stores or your customers’ doorsteps.
As such, supply chain management covers how you create and deliver your goods or services and how you maintain relationships with each link in your chain.
What Are Logistics?
The term “logistics” stems from the military, which used it to describe how military personnel obtained, stored, and moved their equipment. It naturally gravitated to the business world to describe the same thing. In business, logistics refers to the process that covers acquiring a resource or product and transporting it to its destination.
Therein lies the similarity between logistics and supply chain management. Both involve getting goods to customers. However, logistics differs because it’s typically a single component of your supply chain. It refers to how goods and materials move along the chain. But it doesn’t account for the various management and production processes used to manufacture those goods.
Is Supply Chain Management and Logistics the Same?
As you can likely see from the above descriptions, logistics and supply chain management aren’t the same thing. Logistics is a component of managing a supply chain, along with negotiating with vendors, navigating relationships between suppliers, and creating your goods or services.
To strengthen your understanding of the differences between the two, let’s look at logistics management vs. supply chain management.
Difference Between Logistics and Supply Chain Management
Though the two practices intersect, there are several differences you need to understand, particularly in terms of the scope and inherent focus of each process.
One Activity vs. Several
Logistics is a term used to describe three activities that fall under the same umbrella – storing, shipping, and delivering goods. Each of these activities has to do with how you move goods through your organization. However, none of them affect what you do to create those goods or the internal processes you follow.
Supply chain management splits its focus between multiple activities. In addition to considering how to transport goods, you consider the following activities:
- Inventory planning
- Sourcing and negotiating with vendors
- Manufacturing your goods
- Maintaining personnel and equipment
- Planning the use of labour
If one of these activities fails, a link in the supply chain gets damaged or broken. You have to fix this link. Otherwise, you’ll experience delays in getting your goods or services to your customer.
The Needs Served
What is supply chain management and who does it serve in the context of your organization?
Supply chain management is all about the processes used to create a competitive advantage within your industry. For example, creating a piece of equipment that manufactures a part faster than anybody else on the market means you strengthen a link in your supply chain. You can make the part quicker, which means you can change how you plan your labour and, ultimately, speed up the delivery to the customer.
These are all competitive advantages that make customers more likely to work with your company.
By contrast, logistics focuses more on the end user. It’s about how to get your goods and services to the customer most efficiently, ensuring you meet their expectations and needs.
While both processes impact how you move goods and services, supply chain management is far more complex than logistics. With logistics, you only need to consider how to store and move your goods. Often, this involves ensuring you have enough warehouse space for storage and striking up a relationship with a reliable courier, assuming you don’t deliver the goods yourself.
These are considerations in supply chain management, too, due to logistics being a component of supply chain management. However, the latter adds complexity because you look beyond the physical act of moving goods.
Collaborations, negotiations, and partnerships, including how you manage all three, fall under the supply chain umbrella. So too do order management, tracking, reporting, and troubleshooting. You also have to consider your internal processes to determine how best to organize your workforce.
Similarities of Logistics and Supply Chain Management
Though they’re different activities, logistics and supply chain management have some similarities. The biggest is that both focus on your goods or services, and how you deliver those goods and services to customers.
Furthermore, mastering both helps you create a successful company that’s able to meet its customers’ needs.
What Are Logistics in Supply Chain Management?
The role of logistics in supply chain management is simple – it determines how well you do at getting your goods to your customers. As such, you could consider logistics to be the most important link in your supply chain. Processes may be inefficient elsewhere. But as long as you’re delivering your goods on time and as expected, customers won’t know about any other issues in your supply chain.
Understand the Difference
Logistical concerns factor into supply chain management. You need to know how you store and transport your goods to keep your supply chain running as smoothly as possible. However, logistics isn’t the same as supply chain management.
Your supply chain has multiple links, each of which you need to maintain and manage. A breakage of one of those links, such as the loss of a raw materials vendor, has knock-on effects that weaken the supply chain. Similarly, a breakdown in your logistical processes affects your chain in different ways, depending on who you serve.
For a customer-focused business, poor logistical processes hamper the end of the chain, meaning you don’t deliver on time. The same applies to business-focused companies. But in this case, poor logistical management impacts another company’s supply chain, creating even more damaging knock-on effects.
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