The terms logistics and supply chain management are often used interchangeably. While either term can be used sometimes to describe the other, they are essentially different processes; the core functions of each activity are not the same.
In simple terms, logistics is a function of the supply chain that focuses specifically on the movement of goods. Supply chain management is more complex and involves the overall flow and storage of goods. To understand the core differences, it is most beneficial to study the details of each process.
What is a Supply Chain?
A supply chain is a system of operations between a company and its suppliers that focuses on producing and distributing goods and services to the end-user. The system involves several different activities, people, organizations, information, and resources involved in the journey from goods as raw materials to the point of consumption.
Supply chains are created to help companies streamline their services in order to reduce costs and gain a competitive advantage over other businesses in their industry.
Supply chain management (SCM) is the process of optimizing the supply chain to create a speedier production cycle, reduce costs, and increase customer satisfaction.
What is Supply Chain Management?
Supply chain management is the management and organization of the flow of goods and services. It includes all processes involved in transforming raw materials into finished products.
There are many different aspects involved in the supply chain management framework. It is often noted as having five important elements:
- Raw material sourcing
The initial planning element is the developmental stage where the supply chain strategy is created. The remaining elements are the specialist areas involved in carrying out that plan. Successful SCM plans implement expertise in each of these key stages to meet customer demands efficiently and create mutually beneficial relationships with suppliers, manufacturers, and end-users.
Successful SCM cannot exist because of a business’ capabilities alone. It requires close collaboration with customers, suppliers, and other organizations to maintain consistently high performances at all supply chain sections.
What is Logistics?
Logistics is the process of transporting resources from one storage location to another. It incorporates the people, materials, inventory, and equipment involved in the process. The term was initially coined in the military due to the movement of supplies to soldiers in the field.
Logistics management is involved in the early and late stages of the supply chain. It is broadly categorized into two different groups:
- Inbound Logistics: these are the activities involved in sourcing material, storage, handling, and transportation between storage sites.
- Outbound Logistics: these are the activities involved in collecting, maintaining, and delivering a product to the end customer.
As well as transporting items, warehousing is a major aspect of logistics. This can involve any combination of storage, packing, picking, order fulfillment, stock management, handling, and other key warehousing tasks. Most logistics companies also handle reverse logistics, or returns, on behalf of product or service providers.
Key Differences Between Logistics and Supply Chain Management
The most important differences between logistics and SCM are:
- The movement of goods inside and outside the business is known as logistics, a part of the overall supply chain.
- The integration and execution of activities between a business, suppliers, and end-users is called supply chain management.
- The core objective of logistics is to fully satisfy the end customers.
- The main objective of SCM is to create a competitive advantage.
- There is generally a single or limited number of organizations involved in logistics.
- SCM involves several different organizations.
Effective SCM gives all entities within the chain competitive advantages and is responsible for success and profitability in the market. Logistics plays a significant role in successful SCM and is vital in the smooth running of a business.
Improve SCM Through Quality Logistics
As separate functions, both SCM and logistics are crucial aspects for any business. While SCM is an all-encompassing business framework, it can be improved through quality logistics management. Whether you invest in warehouse management systems (WMS) or outsource to a third-party logistics (3PL) company, it’s important to focus on efficient logistics.
Whatever type of business you’re involved in, working alongside a world-class shipping company can bring significant advantages. For further advice and information, contact Asiana USA at (855)-500-1808.