Logistics and supply chain management are two terms that are generally used synonymously, but in fact, they are two different functions of a business organization. This article aims to clearly distinguish between what is logistics and supply chain management so that it can assist organizations that are seeking to enhance their supply chain management processes.
What is Supply Chain Management?
Supply chain management refers to the distribution of materials, goods and services that make up a firm’s chain of production from the point of procurement to the end product. Supply chain management (SCM) is responsible for this movement and flow of goods and information through the supply chain. Hence, the objective of SCM is to establish a chain that offers maximum value to the end consumer and provides a competitive edge to the firm.
Specifically, supply chain management involves coordinating and optimizing the following:
- Sourcing and procurement of raw materials or components
- Manufacturing and assembly processes
- Warehousing and inventory management
- Order fulfillment and distribution
- Returns and defect management
The supply chain is the entire spectrum of suppliers, production facilities, storage and distribution centers and transportation that goes into satisfying the customer’s needs. It also applies to the supply chain systems, processes and the supply chain management strategies of demand and supply.
What is Logistics Management?
Logistics refers to the movement, transportation, and flow of goods and services between a company and its suppliers or customers. Logistics management oversees this flow of products, including acquiring, storing, and transporting resources to their final destination.
While supply chain management focuses on the entire production flow, logistics comprises a specific component within the broader supply chain. Logistics software, developed by the most reliable companies offering services like here: https://www.eliftech.com/logistics/, involves process strategy, planning, and operations related to the transportation and storage of goods.
Key aspects of logistics management include:
- Transportation management: Choosing shipping modes, routes, carriers and scheduling to optimize delivery
- Warehouse management: Operating storage facilities and inventory management
- Materials handling: Safely and efficiently moving goods via equipment and packaging
- Sourcing vendors: Procuring carriers, 3PLs, or other logistics services
- Logistics network optimization: Designing facilities, routes and transportation to lower costs
In summary, logistics represents the transportation component within the end-to-end supply chain flow. It’s focused on efficiently coordinating the physical movement of products between parties. So, are supply chain and logistics the same or very similar concepts?
Key Differences Between Logistics and Supply Chain
While logistic and supply chain management work hand-in-hand, there are some notable differences between the two concepts:
Scope
Supply chain management involves a broader scope of business processes beyond logistics. As described above, SCM encompasses the entire lifecycle of products, from raw materials through production, fulfillment and returns. Logistics comprises the set of physical distribution tasks within the supply chain flow.
Strategic Planning
SCM requires extensive strategic planning to design and manage complex global supply chains. Logistics focuses more on operational strategies for transporting goods in the most efficient way possible.
Goal Orientation
The goal of SCM is to boost customer satisfaction by streamlining an end-to-end system of products, information and finances. Logistics aims to optimize daily transportation, inventory and warehousing tasks.
Primary Activities
Supply chain management comprises sourcing, production, warehousing and delivery. Logistics involves warehousing, transportation and distribution.
Focus Areas
SCM focuses on optimizing flows and reducing excess inventory across the entire supply chain. Logistics vs supply chain emphasizes daily transportation operations and warehouse workflow.
The Interconnectivity of Supply Chains and Logistics
While they have distinct definitions, supply chains and logistics systems from Eliftech work closely together:
- Logistics comprises the movement of goods within the broader supply chain flow.
- Transportation and distribution have a major impact on supply chain efficiency.
- Supply chain and logistics managers must collaborate to design optimal systems.
- Technological innovations link supply chain planning with logistics execution.
For example, a supply chain manager makes strategic decisions about the location of manufacturing plants and warehouses in a global network. The logistics manager then develops transportation routes to link these facilities in the most cost-effective way possible. Producing optimal supply chains requires aligning strategic goals with transportation capabilities.
Technology also enables real-time coordination between long-term supply chain vs logistics planning and daily logistics – especially across expansive global networks. Supply chain analytics offers end-to-end visibility to predict changes or delays. Logistics managers can then adapt transportation plans accordingly.
Logistics Activities Within an End-to-End Supply Chain
To understand the interconnectivity further, let’s break down the key phases of a typical supply chain and where logistics plays a role in each stage:
Sourcing and Procurement
The first step of any supply chain is acquiring raw materials and components from suppliers. The procurement process must evaluate suppliers to find optimal price, quality and reliability. Logistics is a criterion during supplier selection based on location, transportation modes or history of on-time delivery.
Manufacturing
During production, supply chain managers coordinate the manpower, machinery, facilities, inventory and systems required to transform materials into finished goods. Logistics supports manufacturing by ensuring timely delivery of required components. Transportation is also necessary to move products between production sites.
Warehousing and Inventory Management
Warehouses store goods between manufacturing and final delivery to customers. Logistics oversees daily warehouse operations, including inbound/outbound transportation, facility layouts, inventory tracking systems and materials handling equipment. Supply chain managers design warehouse networks and inventory policies across sites.
Order Fulfillment and Distribution
Customer orders initiate the deployment of finished goods from storage to final delivery. Logistics coordinates selection and outbound transportation according to customer requirements. Supply chains aim to optimize speed and accuracy during order fulfillment.
Returns and Defect Management
Reverse logistics brings defective or excess products back from customers. This requires specialized transportation, refund processing and quality inspections. Supply chains design the network flow for routing return items.
This end-to-end view shows that logistics plays a vital tactical role within each supply chain process. At the same time, SCM provides the overarching strategy linking these phases into one cohesive system.
While logistics & supply chain management have distinct definitions and focus areas, they rely heavily on each other for a company’s success. Optimizing daily transportation and warehouse operations achieves little without properly designed infrastructure and inventory policies. Supply chains can only thrive when logistics consistently execute distribution strategies. This interconnectivity allows businesses to serve customers efficiently.
Supply Chain Technology Enables Logistics Optimization
Another key linkage point between supply chains and logistics is technology. Supply chain management software connects strategic planning with logistics execution across expansive networks. These technology capabilities include:
End-to-End Visibility
Visibility tools give supply chain and logistics managers real-time tracking across global supply chains. This allows for coordinating daily transportation plans with broader supply and demand shifts. Logistics managers can rapidly respond to production delays, inventory shortfalls or delivery exceptions.
Advanced Analytics
Supply risk management uses data to forecast risk and new trends in the supply networks. These insights are useful to logistics managers to modify transportation plans in line with the results. Analytics can help to synchronise logistics with fluctuating customer needs and global disturbances.
Integrated Business Planning
Integrating systems and procedures helps to establish real-time interaction between departments. When supply chain plans change, logistics plans adjust for the day’s operations in the warehouse and for transportation.
Automation and AI
Supply chain and logistics execution are being automated by emerging technologies. It can also help improve networks, predict demand and manage stock through the use of AI-powered systems. Outsourcing mundane logistics tasks means the planner is free to strategize at a macro level.
These innovations illustrate technology’s indispensable role in linking strategic objectives with logistics capabilities. Supply chain software solutions enable responsive, optimized systems – rather than fragmented processes. With technology integrations, supply chain leaders can design and adapt dynamic networks supported by flexible daily logistics operations.
Supply Chain and Logistics Optimization Drive Business Success
In today’s customer-centric and rapidly evolving business climate, enterprises need supply chains and logistics synchronized to respond to opportunities and risks in real time. Technology now enables this level of agility and resilience.
Optimized logistics allows companies to rapidly fulfill customer orders profitably. Efficient supply chains ensure production resources are in the right locations globally. When transportation, inventory and facilities are designed holistically across the end-to-end chain, companies can best serve customers while lowering costs.
This exemplifies why both supply chain and logistics excellence are integral for business growth and profitability. Logistic supply chain management provides the infrastructure and policies enabling customer satisfaction. Logistics fuels this engine by coordinating the everyday movement of goods. Aligning these two pillars drives operational efficiency to build competitive advantage.
While logistics and supply chain have their own focus areas, leaders recognize the interconnectivity between strategic and tactical operations. Keeping this symbiotic relationship at the forefront allows businesses to build truly optimized, customer-centric enterprises.
