There is much confusion about these two terms as they are often used interchangeably to describe the same business operations but they are in fact distinct, though related. Let’s get some clarity on this and pin down the key differences between logistics and supply chain management.
Logistics was first used in the military to describe the handling, storage and transportation of goods and army personnel. Today, this term is used in many spheres of day to day life but the basic definition is the planning, execution, and control of the movement of goods and or people and all related activities.
Logistics can be divided into two categories:
- Inbound Logistics covers all the activities needed for the procurement of needed materials, handling, storage and transportation.
- Outbound Logistics involves the collection, maintenance and delivery of products to the customer.
Defining Supply Chain Management
This is a modern term which encompasses logistics but has evolved to cover much more.
Supply Chain Management (SCM) is multi-dimensional and seeks to manage and monitor the flow of raw materials, the manufacture of finished products and the control of the transportation of end product to the consumer. It involves multiple organisations and the emphasis is on efficiency and finding a competitive advantage. Effective SCM looks at all aspects needed in order to speedily ship the best possible product to customers at the lowest cost.
Key Differences between Logistics and Supply Chain Management
- Logistics is one activity within Supply Chain Management.
- Supply Chain Management takes into account every small process necessary for the production and delivery of the product.
- Logistics involves only one organisation while many organisations may be involved in Supply Chain Management.
Whether you are a distribution house or a manufacturing firm, an effective Supply Chain Management strategy is a must! It is only through the implementation of SCM tools like Warehouse Management Systems and Transport Management Systems that organisations can effectively manage logistics as well as all aspects of their supply chain.