Supply chain and logistics are often interchangeably used by most of us. We tend to consider these two as synonyms where in reality, these two are related but not the same. Logistics is a part of the supply chain.
To ensure that a business is functioning properly, the success of the supply chain is important. During the course of this article, we will be discussing the difference between supply chain management and logistics management.
Table of Contents
- Difference Between Supply Chain Management and Logistics Management
- What is Supply Chain Management?
- Importance of Supply Chain Management
- What is Logistics Management?
- Importance of Logistic Management
Difference Between Supply Chain Management and Logistics Management
|Parameters||Supply Chain Management (SCM)||Logistics Management|
|Definition||Manages the entire supply chain from raw material procurement to final product delivery.||Focuses on the efficient flow and storage of goods and services from origin to consumption.|
|Scope||Covers all aspects including production, distribution, sales, and customer service.||Mainly centered on transportation and storage of goods.|
|Components||Encompasses procurement, production, distribution, logistics, sales, and customer service.||Involves transportation, warehousing, inventory management, and order fulfillment.|
|Objective||Aims to optimize the entire supply chain for timely, cost-effective product delivery.||Ensures efficient, effective transportation and storage of goods to meet customer needs.|
|Decision Making||Involves strategic decisions about production, distribution, and inventory management.||Focuses on operational decisions related to transportation, warehousing, and distribution.|
|Key Focus Areas||Coordinates with all supply chain partners to enhance customer satisfaction and optimize resources.||Optimizes the movement and storage of goods and related information within the supply chain.|
|Technological Integration||Integrates advanced technologies for comprehensive supply chain oversight and optimization.||Uses technology mainly for tracking and managing goods movement and storage.|
|Performance Metrics||Assesses performance based on supply chain efficiency, customer satisfaction, and cost reduction.||Evaluates performance based on transportation costs, delivery timeliness, and warehouse efficiency.|
What is Supply Chain Management?
Before discussing supply chain management, one should be aware of the term ‘Supply Chain’. A supply chain is one of the core activities of the organization that is associated with the delivery of goods and services to customers. Supply chain management is defined as the management of flow of goods as well services and includes processes involved in transforming raw materials to final products. The objective of supply chain management is to implement chains that are both efficient and economical. Supply chain management is used for controlling, shipping and distributing products. Companies can cut down on excess costs and expedite the delivery process through supply chain management.
In supply chain management, the manager coordinates with the logistic team of all the aspects of the supply chain that consists of:
- Delivery and logistics
- Return system
Benefits of Supply Chain Management
1. End to End Access to Supply Chain
It is a management process that overviews all aspects of the company’s service from production to sale. With the incorporation of software in the supply chain, there is better access to data for managers. This helps in the smooth sharing of data leading to better access to the entire supply chain.
2. Improved Quality
Through supply chain management, the managers are able to implement a standard minimum quality criterion. This enables direct suppliers in identifying and partner with secondary suppliers. The management process also compels suppliers to adhere to the process guidelines which are in compliance with the company’s process requirements.
3. Higher Efficiency
Due to smooth access to real-time data, companies can detect any manufacturing delays. This allows companies with the time to implement backup plans such as finding another supplier. This not only makes the entire process more effective but also saves everyone’s time.
4. Cost Minimizations
Due to the rising shipping cost, shipping cost minimization is also a part of supply chain management. Supply chain managers identify the most efficient methods of shipment that will be a faster method as well.
5. Reduction in Overhead Costs
Due to the availability of real-time data, supply chain teams can get an accurate prediction of the demand which can lead to reduced overhead cost. Through appropriate automation solutions and optimization of warehouse layouts, the company can improve productivity and implement a better inventory management system.
Importance of Supply Chain Management
Supply chain management incorporates technology through which the entire process gets streamlined. It can help in achieving various business objectives such as reduced risks of recalls, improved product quality and more customer satisfaction. Companies have witnessed improved profit margins with the proper supply chain management processes.
What is Logistics Management?
Logistics is part of the chain and is not a different process. It includes planning, storing and moving goods. It also coordinates people, equipment, facilities and other resources so as to ensure the movement of goods at the desired location. Logistics is important for the smooth performance of the supply chain. Logistics management is a part of supply chain management and supply chain engineering to plan, implement and manage the storage of goods and services.
Logisticians control the movement of goods via shipment tracking, fleet management, sharing information and coordinating with partner organizations. While the movement is a part of logistics, it is important to store the goods in any facility once these goods have reached the destination.
Logistics management involves a number of activities within the supply chain including the following:
- Purchasing and arranging the inbound movement of materials and inventory from suppliers to manufacturers.
- Storage and movement of finalized goods along with the information flow from the production line to end-users.
- Market planning, requirement planning, supplier management, ordering and order controlling.
- Managing the flow of goods.
- Order processing, warehousing and transportation to ensure the delivery of finished goods to customers.
Importance of Logistic Management
Through effective logistics management, efficiency is increased, cost reduction is promoted and there is better inventory control. It also increases the satisfaction of the supplier as well as customers. Following are the benefits of logistic management:
1. More Transparency
Logistic management facilitates transparency and improves visibility in operations. Through logistics management plans, logisticians can analyze historical data and provide route optimization for increasing efficiency.
2. Improved Customer Experience
Through improved logistic management strategies can improve transportation for eliminating disruptions such as delayed delivery. This will enhance the positive customer experience due to better delivery services.
3. Increased Profits in the Business
Through logistics management, companies get visibility on operations, build improved customer relations and enjoy reduced necessity for excess inventory maintenance. The rate of order fulfilment with improved customer relations thus increasing the profitability of the company. It also supports synchronized supply chain management.
Supply Chain Management and Logistics Management: Which one to Choose?
Supply Chain Management (SCM):
- Overview: Manages the entire supply chain from raw material procurement to final product delivery.
- Scope: Covers production, distribution, sales, and customer service.
- Objective: Aims to optimize the entire supply chain for cost-effective and timely product delivery.
- Decision Making: Involves strategic, broad-level decisions.
- Technology Use: Integrates advanced technologies for end-to-end supply chain oversight.
- Ideal For: Organizations looking for comprehensive supply chain optimization and management.
- Overview: Focuses on the efficient flow and storage of goods and services from manufacturing to consumption.
- Scope: Centered mainly on transportation and storage of goods.
- Objective: Ensures efficient and effective transportation and storage of goods to meet customer needs.
- Decision Making: Focuses on operational decisions related to transportation and warehousing.
- Technology Use: Primarily uses technology for tracking and managing goods movement and storage.
- Ideal For: Organizations focusing specifically on optimizing the movement and storage of goods.
Which One to Choose?
- Choose SCM If:
- Seeking comprehensive management and optimization of the entire supply chain.
- Looking to enhance coordination and collaboration with all supply chain partners.
- Choose Logistics Management If:
- Main focus is on optimizing transportation and storage of goods.
- Looking for operational efficiency in goods movement and warehousing.
What are the different models in supply chain management?
There are 6 different types of supply chain management models including continuous flow, fast chain, efficient chain, custom-configured, agile and flexible.
What is a supply chain flow chart?
Supply chain flow charts display detailed actions that are required for achieving an end to end delivery. Flowcharts help in identifying improvements that can facilitate the delivery of products to customers. These flow charts help organizations in achieving an efficient process with minimum errors.
What is an FMCG supply chain?
The fast-moving consumer goods (FMCG) supply chain is one of the biggest supply chains. The high demand for innovative products is accomplished by producing a variety of goods at high volume. The FMCG chain is more flourished in developing markets since consumers can spend more.
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