The difference between Logistics and Supply Chain Management

It is something we all think to know but the moment that they ask us to explain, we freeze. It is something I do when I get the question because it is a difficult thing to explain. Especially to people that are not familiar with the terminology and they are not working in the sector.

Today I am going to try making your life a little bit easier by explaining the general meaning of both Logistics Management and Supply Chain Management and conclude by explaining the difference between the two.

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LOGISTICS MANAGEMENT

The term Logistics is used to define the process of handling goods within a specific facility/department while keeping an inventory document of the status and the whereabouts of different inventories at the same time.

In other words we can describe logistics as the process of planning, execution and control over the movement of goods and other related activities.

The purpose of logistics is to provide JIT (Just-In-Time) delivery for the primary sake of customer satisfaction.

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SUPPLY CHAIN MANAGEMENT

Photo by Lily Banse on Unsplash

Supply chain on the other hand defines all the activities, which include the purchase of raw materials, receiving of raw materials, the manufacturing and production of goods and the delivery of the goods wanted by the customer at the intended destination.

This is not the only thing it includes. it also contains the development of the planning and management of all activities involved in sourcing and procurement conversion and all management activities. (some of them were mentioned above)

To conclude: Supply Chain management integrates supply and demand management within and across companies.

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LOGISTICS VS. SUPPLY CHAIN MANAGEMENT

Think of a supply chain as a network of manufacturers, suppliers, wholesalers, retailers, etc, rather than a series of specific functions. In the end, Logistics is only a small piece of what is going on when we talk about Supply Chain management. This can be illustrated with the following examples about the profession, the goals and technology.

Profession:

Logistics

• Managing and planning for logistics policies, objectives, and initiatives.

• Creating procedures for logistics management to optimize product workflow and minimize cost.

• Monitoring vendor selection and negotiation, distribution, transportation, and inventory control.

SCM

• Overseeing and managing overall supply chain and logistics operations, to maximize efficiency and minimize cost.

• Collaborating with multiple-functional managers to plan and execute the development of a distribution centre operational process to enable seamless transfers.

• Managing and monitoring vendors' qualifications and performances to ensure they meet the company's requirements.

Goals:

Logistics

• The purpose of logistics is to provide just-in-time delivery for the primary sake of customer satisfaction.

SCM

• The goal of supply chain management is supply chain optimization for the sake of competitive advantage, as in the most efficient and cost-effective methods for those working within a supply chain.

Technology:

Logistics

• TMS (Transport Management System)

• WMS (Warehouse Management System)

SCM

• ERP (Enterprise Resource Planning)

• RFI (Radio Frequency Identification)

• CRM (Customer Relationship Management)

• Big Data

The main thing to remember from this post is that Logistics is actually a part of the Supply Chain. The chain has a lot of different aspects but without Logistics it would fall apart immediately.