There are a lot of key industry terms that are used a lot and have evolved over time. This has resulted in some blurred definitions of terms, especially when referring to supply chain management and logistics.
While both terms do have similarities, they should be used separately as they are different concepts with different meanings altogether. When referring to the supply chain, it is an overarching concept that links together multiples industry processes. Whereas logistics refers to a process within the supply chain which focuses purely on the flow of goods. Despite the interchangeability of these words, there are important differences between the two.
What is supply chain management (SCM)?
Supply chain management is the main term to describe the collaboration between processes and firms to connect a chain of suppliers, partners and customers. With the aim of boosting efficiency and value for the end customer. It is the framework of operations that assists the start and end of goods, as well as everything in between!
The process of the supply chain management begins when an organisation receives an order for a product or service. It oversees the collaboration between suppliers, manufacturers, logistics, wholesalers, retailers to the final stage, the end customer. It covers every stage of a goods origin to its final destination. Often, it involves multiple companies across the supply chain.
SCM can be a difficult thing to manage, which is why an efficient supply chain management can create a skilled competitive advantage.
What is logistics?
Logistics is a term that refers to one of the processes within the supply chain. It is responsible for the storage, transportation, warehousing, and packaging of goods. The aim of logistics is to ensure the end-user or customer receives their desired goods at the right place, time and at the right quality and price.
Although logistics only makes up a part of the full supply chain, the quality and success of logistic processes are essential for an excellent supply chain performance. Quality logistics is about the efficient storage and transport of goods, this can include a wealth of processes depending on the type of goods.
Logistics can make or break a supply chain, because of its importance, efficient logistics contributes to the satisfaction of end-users. So, if the end-user is not happy, the supply chain is not effective either.
What are the differences?
So, it’s important to review that while the terms are related to one another, they shouldn’t be used interchangeably. Unless you wish to confuse your team!
The key difference is a supply chain management brings together multiple partners and companies to create a flow and efficient supply of goods from its origin to its final stop, the customer. Logistics, on the other hand, is typically managed by one company who works as an element within the supply chain to effectively transport and deliver goods.
Both terms need one another to run effectively, which is why they should not contradict one another, but instead, supplement one another. In addition, we believe that outstanding logistics can also create a competitive advantage as well as satisfied customers.