Although many of us might mistakenly believe that supply chain and logistics are the same thing, they are actually two different ideas with their own special traits.
The contrasts between them are covered in this article, along with which one should be given priority while managing your company’s operations.
Continue reading to learn more!
Introduction
Although supply chain management and logistics are frequently used synonymously, there is a significant distinction between the two.
While supply chain management covers the full process of developing and delivering items, from sourcing raw materials to distributing finished goods, logistics is the process of moving commodities from one location to another.
So, which is more important? The answer may surprise you.
In today’s global economy, supply chain management is critical to a company’s success. A well-run supply chain can make a company more agile, responsive, and profitable. But none of that matters if the logistics are not up to par.
What is Logistics?
The term “logistics” is derived from French word logistique which was first coined by the Swiss military officer and writer Antoine-Henri Jomini in the 18th century to describe the coordination of complex operations.
The word has since been adopted by business and academics and has become synonymous with managing the flow of resources between point A and point B.
In its simplest form, logistics is about getting things from one place to another. But as businesses have become more globalized and customers have become more demanding, logistics has evolved into a much more complex operation.
Logistic is further divided into 4 parts: Warehousing, Inbound logistics, Outbound logistics and Reverse Logistics.
- Warehousing is the process of storing raw materials, work-in-process or finished goods in a warehouse.
- Inbound logistics is the process that encompasses the taking in and handling of materials arriving at a company.
- Outbound logistics is the process that encompasses the shipping of finished products from a company to the customer—whether it is to retailers or original equipment manufacturers.
- Reverse logistics is the process of handling returns, repairs and other post-sale customer support.
Logistics is an essential part of any company’s supply chain and the ability to effectively manage it can be a key factor in determining the success of a business.
What is Supply Chain?
A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.
Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer.
In Supply Chain Management it is further classified into 3 models: Adile Model, Flexible Model and Custom Configured Model.
- Adile Model: It involves the organization of a supply chain that is focused on cost-cutting.
- Flexible Model: It involves the organization of a supply chain that is focused on flexibility and responding to changing customer demands.
- Custom Configured Model: This model focuses on customizing a supply chain to meet specific customer needs.
Supply chain management (SCM) is an active daily operation to maximize customer value and achieve a sustainable competitive advantage. It involves coordinating and integrating all supply chain activities—from suppliers to manufacturers to distributors to retailers—to create seamless processes across multiple channels.
Difference between Logistics and Supply Chain
The terms ‘logistics’ and ‘supply chain’ are often used interchangeably, but they actually refer to two different things.
Logistics is the process of planning, implementing, and controlling the efficient flow of goods, services, and information from point of origin to point of consumption.
Supply chain, on the other hand, is the network of facilities and distribution options that are used to source, produce, and deliver a product or service.
Logistic involves planning, organizing and controlling the flow of materials from the source to the destination point.
Whereas, supply chain includes suppliers, manufacturers, distributors and customers who work together to deliver a product or service from its raw material stage to the end customer.
Logistics includes procurement, inventory management, transportation, warehousing and distribution activities.
Supply chain involves logistics along with other activities such as product design, marketing, sales and customer service.
That been said, both logistics and supply chain management are vital functions in any business that deals with physical goods. Without effective planning and execution, businesses would struggle to get their products to market on time and in good condition. This could lead to lost sales and damage to reputation – not to mention the impact on staff morale if employees are constantly having to deal with disruptions caused by poor planning.
Advantages of Logistics
A key advantage of logistics is that it can help businesses save money. By streamlining the supply chain and ensuring that goods are delivered to the customer in a timely and efficient manner, businesses can reduce their overall costs.
In addition, it can also help businesses improve their customer service levels by ensuring that products are delivered on time and in perfect condition.
Another advantage of logistics is that it can help businesses increase their sales. By having an efficient and well-run logistic operation, businesses can ensure that their products reach more customers in a timely manner. This can lead to increased sales and profits for the business.
Finally, logistics can also help businesses reduce their environmental impact. By using environmentally-friendly transportation methods and packaging materials, businesses can minimize their impact on the environment.
Advantages of Supply Chain
There are many advantages to having a well-run supply chain.
First, supply chain is a more holistic approach that considers all aspects of the flow of materials, information, and finances.
Perhaps the most important advantage is that it can help to save your business money. A well-organized and efficient supply chain can help to reduce inventory costs, while ensuring that products are delivered on time and in good condition.
In addition, a good supply chain can help to improve customer satisfaction by ensuring that orders are filled promptly and accurately.
Another important advantage of a strong supply chain is that it can help to improve the company’s competitive position.
A well-run supply chain can give you a significant cost advantage over your competitors, while also helping to ensure that you have the necessary raw materials and finished products available when you need them. This can give a critical edge in today’s highly competitive marketplace.
Supply chain management is proactive process. By understanding the entire system, companies can anticipate changing market conditions and be better positioned to respond quickly. This helps to minimize disruptions and maximize efficiency.
So Which is More Important?
There is no easy answer when it comes to deciding which is more important – logistics or supply chain management.
However, both are critical to the success of any business.
Without effective logistics, businesses would be unable to get their products to market on time or in good condition. Likewise, without effective SCM, businesses would be unable to source the raw materials or components they need to produce their products.
FAQ
Is logistics better than supply chain?
Logistics is a subset of supply chain, with the focus being on the movement of goods and services from point A to point B. Supply chain encompasses all aspects of a business’s operations, including procurement, manufacturing, logistics, inventory management, and customer service. As such, both are important for business success.
Is logistics part of supply chain?
Yes, logistics is a part of the supply chain. It focuses on the planning, implementation, and control of the physical flow of goods and services from one point to another. Supply chain encompasses all aspects of an organization’s operations, including logistics.
Is there a future in logistics?
Yes, logistics is an important and growing field. With the increasing globalization of business, companies are always looking for ways to streamline their supply chains and increase efficiency. As a result, there is a great demand for skilled professionals in logistics and supply chain management.
What are the four stages of supply chains?
The four stages of the supply chain are plan, source, make, and deliver.
