Supply chain management and logistics may seem interchangeable, but they are different. While both terms refer to the process of moving inventory from place to place, they differ in their scope and related activities. Understanding supply chain management vs. logistics will help you collect the data you need to improve your efficiency.
What is Supply Chain Management?
Supply chain management involves coordinating all activities and processes associated with sourcing raw materials, manufacturing, and delivering a final product.
Key Components of SCM
SCM involves planning, sourcing, production, distribution, and returns. During the planning stage, you analyze your customers’ demands against your supply and align your resources so you can meet these needs.
At this stage, you’re not only planning inventory volume, you’re also planning manufacturing, logistics, and staffing. During the sourcing stage, you work with vendors to supply raw materials you need to produce your inventory.
Once you’ve assessed your needs and sourced your raw materials, you can start manufacturing, which involves production of the finished product. Finally, you deliver your products either to a warehouse or directly to your customers. This is the stage in which logistics and supply chain management are most connected.
Finally, your supply chain will likely include returns. Whether you end up having to recall a certain item because of a manufacturing defect or a product doesn’t meet customer needs as expected, you will have to take some inventory back and return the customer’s money.
Importance of SCM in Business
Most businesses have a supply chain process. For example, the healthcare supply chain includes the hospitals, medical professionals, insurance companies, regulatory agencies, and equipment manufacturers involved in delivering care to patients and rendering payment.
Supply chain management allows businesses to improve customer service by adequately planning inventory to meet their needs. SCM also helps you reduce operational costs by assessing areas in your supply chain you can streamline and save time and money. It also helps you identify product defects earlier in the process so you can improve your quality over time.
What is Logistics?
In business, logistics refers to the process of planning and managing how you move goods from one location to another.
Types of Logistics
There are three types of logistics: inbound, outbound, and reverse. Inbound logistics involve transporting, storing, and delivering goods into your business. Outbound logistics involve transporting, storing, and delivering goods from your warehouse or store to your customers. Reverse logistics refers to how you deal with returned goods and products. You may recycle them, reuse them, or dispose of them.
Third-party logistics is when you outsource your logistics to an external company. You could outsource part of the process such as warehousing and storage, or you may outsource all logistics functions.
Key Components of Logistics
Like SCM, logistics management involves multiple components. Warehousing and storage refers to how you store raw materials and inventory until you’re ready to sell them. At this stage, you process items to make sure they are the right model, color, size, and other specifications. You also need to inspect your goods for defects and properly secure items in your warehouse or store.
Inventory management involves planning space for all your goods. At this stage, you manage inventory levels and plan their storage locations to make it easy for warehouse managers to access and distribute products.
Packaging refers to the boxes, bags, and other methods you use to secure items during shipping. It often involves a delicate balance between controlling costs and using sufficient packaging to make sure items aren’t damaged during shipping.
Transportation and trucking is the part of logistics in which your items are moved from their original location to their final destination, be it a warehouse, a storefront, or directly to the customer. It involves coordinating the ships, planes, and trucks that move your merchandise.
Information logistics refers to the data across your supply chain, including asset tracking and inventory updates.
Key Difference Between SCM and Logistics
So what is the difference between a supply chain and a logistics network? Is supply chain bigger than logistics?
Scope and Functionality
When you focus on supply chain management, your aim is to improve processes and give yourself a competitive edge, while logistics management involves delivering goods to customers cost-effectively. You may run predictive analytics as part of SCM to better manage your inventory based on customer behavior. That way, you avoid stockouts and costly storage of excess inventory.
Roles and Responsibilities
Supply chain managers coordinate with other teams in a business to plan for demand and optimize processes. Logistics operation managers only focus on the processes and procedures associated with moving products through the supply chain.
Strategic vs. Tactical Perspectives
SCM focuses on long-term goals and your company’s big picture. A supply chain manager will use data analysis to refine processes and strategies so your company can deliver the best products to customers based on their needs and desires. Logistics focuses on short-term goals and challenges. A logistics manager works with the supply chain manager to improve logistical components.
Inventory Control and Technology in SCM vs. Logistics
Both SCM and logistics deal with inventory. However, you would use SCM to better manage your inventory levels based on customer demand and behavior. SCM involves predicting which items sell at higher volumes so you can plan to meet customer demand without storing inventory. Logistics involves managing the inventory you have.
Both SCM and logistics use technology to improve efficiency. Logistics technology primarily involves tracking assets from start to finish to speed up the supply chain. SCM technology involves analyzing metrics such as customer purchases, time to deliver, and return volume to identify areas of the supply chain operations that need improvement.
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