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Relationship between logistics and supply chain management

Distribution

26 June 2021

A supply chain covers the production and distribution of goods and services to all types of customers. And, when well executed, both logistics and supply chain management can give companies a competitive advantage and bring value to their customers.

Supply chain logistics is the one that coordinates the storage and shipping of goods (and services) across the supply chain. The practice begins with raw materials, then goes to manufacturing and ends with its distribution to the customer or when products are returned to their final destination. 

While many use logistics and supply chain management interchangeably, they cover different activities, even though they are related.

Logistics and Supply Chain Management

Logistics

Logistics focuses on the movement and storage of products in the supply chain. This means that logistics focuses on the internal movement of goods.

Logistics is an aspect of the supply chain that stores or delivers finished goods or services to customers: manufacturers, distributors or consumers. The goal of logistics is to get goods and services on time and at a competitive price to them.

The processes that fall under logistics are:

  • Demand planning.
  • Transportation.
  • Fleet management.
  • Inventory management.
  • Material handling.
  • Order fulfillment.

In other words, logistics coordinates people, facilities, equipment and other resources to ensure products move on time.

Supply Chain Management

While supply chain management (SCM) is more comprehensive, covering all of the coordination between partners that have a role in this network.

This includes:

The ultimate goal of SCM is to find processes that ensure an efficient flow of goods that give customers an excellent experience.

Additionally, SCM sets the strategy and directs daily logistical activities that happen in factories, warehouses or local shipping centers. It focuses on improving supply chain processes, which can benefit both customers and business partners.

How Are Supply Chain Management and Logistics the Same? 

Both supply chain management and logistics focus on the flow of goods from the point of origin to the endpoint. Both disciplines require careful coordination of supplies, labor and facilities to make sure items can move through the supply chain as required. Logistics is a key component of supply chain management, but just one piece of the equation. 

Similarities between Logistics and Supply Chain Management 

Logistics and supply chain management both work to move, store and deliver goods as efficiently as it is possible. So, supply chain management provides the strategic direction that guides logistics.

Key common aspects of logistics and supply chain management

  • They focus on information, goods, services.
  • They have the ultimate aim of supporting the success of the company.
  • They have the ultimate aim of distinguishing the company from competitors.
  • They seek to increase the customers’ satisfaction.
  • They revolve around the same flow of goods and services, from suppliers to the manufacturers, to the retailer or final consumer.

Differences between Logistics and Supply Chain Management

Supply chain management outlines the strategy while Logistics focuses on the right products being in the right place at the right time. This means that these are intersect but differ when it comes to their scope and focus. 

Key differences between logistics and supply chain management

  • Logistics are activities inside the supply chain management and SCM covers activities that include: production, inventory planning, labor planning, materials, facilities management, manufacturing and delivering goods and services.
  • Logistics focus is on the efficient and cost-effective delivery of goods to customers while supply chain management controls the development of raw materials into finished goods in order to move into their delivery.
  • Logistics emphasizes meeting customer needs and expectations while supply chain management works toward improving processes to create competitive advantages.

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