What Is Supply Chain Management?
Supply chain management (SCM) is the management of a network that helps businesses meet customer demands by sourcing raw materials, producing, and delivering products as quickly and cost-effectively as possible. It also includes the coordination and collaboration within a company and its external partners and customers.
SCM is a broad term that includes demand planning, sourcing and procuring raw materials, manufacturing final products, processing customer orders, storing and transporting finished goods, and managing customer service.
Effective supply chain management helps businesses reduce operating costs, facilitate financial success, improve product availability, and increase customer satisfaction.
What Is Logistics Management?
Logistics management is a component of supply chain management that only deals with the flow of goods, services, and information between the source and consumers. It gives businesses greater visibility into their supply chain operations, enabling them to reduce transportation costs and prevent disruptions.
Logistics management is involved in the coordination and monitoring of several activities, including:
- Sourcing and procurement
- Material handling
- Production planning and scheduling
- Inventory management
- Cost management
Logistics management plays an important role in helping businesses meet customer demands by efficiently planning the movement of products, goods, and resources.
Similarities Between Supply Chain and Logistics Management
Since logistics management is a part of supply chain management, they share similarities in many aspects, such as the flow of products and materials, customer satisfaction, and business success.
Both Focus on Goods, Services, or Information.
Both logistics and supply chain management involve the movement of goods, services, and information from the point of sale all the way back to the point of origin. The flow of logistics management only happens between the supplier and the customer, whereas supply chain management flows can be much longer. An example of this is if your supplier sources raw materials from their other suppliers and customers resell your products to their other customers.
Both Aim to Increase Customer Satisfaction.
Today’s supply chain networks prioritize the end customers’ demands, so their purchase power drives product decisions.
Effective supply chain and logistics management help businesses meet customer expectations by delivering quality products on time, at the lowest price for customers, and at the minimum cost to your company.
Cost-effective and timely movement of goods is a valuable way of achieving competitive advantage through customer satisfaction. Businesses focus on acquiring efficient supply networks and optimizing their logistics and supply chain processes based on customer demands.
For example, logistics managers make customers happy by reducing product costs (and selling prices) by optimizing inventory management and order fulfillment, recharting better shipping routes, and cutting packaging costs. Similarly, supply chain managers respond to unique product configurations demanded by the end user by utilizing partnerships with their suppliers, manufacturers, wholesalers, and retailers.
Both Seek to Support Company Success.
SMBs, as well as global supply chain leaders, face mounting pressure to implement logistics and supply chain management initiatives to circumvent the possibility of business failure by:
- Reducing the cost of business: Supply chain managers lower their purchasing and production expenses by establishing partnerships with suppliers, distributors, transporters, and other stakeholders. Similarly, businesses outsource their warehousing and transport to a third-party logistics provider to improve their overall business efficiency while conserving resources and reducing costs.
- Matching the supply of products with market demand: Supply chain management helps you better match raw material sourcing and procurement with business requirements. For example, suppose you run a grocery store and buy vegetables directly from a farmer. In that case, you can negotiate and adjust the amount you purchase each month based on your requirements. Similarly, good logistics management enables you to communicate customer demands right from the point of sale to the supplier to efficiently meet orders .
- Improving customer service: This is accomplished by delivering quality products to customers on time and at the lowest price. Supply chain and logistics management give you the systems, approaches, and partners you need to gain complete control over your product’s journey throughout the supply chain. As a result, you can optimize your supply chain based on customers’ desired prices and delivery requirements.
Key Differences Between Supply Chain and Logistics Management
The terms supply chain and logistics management are often confused and conflated, while some use the terms interchangeably. But there are clear-cut differences between the two based on their functions, processes, and capabilities.
The Two Work Together, but Are Not Identical.
Logistics and supply chain management work together to provide insights into customer demands that helps managers achieve accurate forecasting and optimize business processes. Supply chain leaders understand that effective logistics performance can help them gain a competitive advantage, make manufacturing processes more profitable, and increase overall productivity.
However, logistics management only deals with the specific activities of production, transportation, and storage of goods and ultimately meets the end customer’s expectations.
In contrast, supply chain management is a broader category involving business logistics, sourcing, strategy, production, transportation management, and many others. Supply chain managers perform end-to-end optimization of internal and external processes, improve supply chain sustainability, predict problems that may arise, and find possible solutions.
The Focuses of Supply Chain and Logistics Management Are Different.
The goal of logistics management is to improve the efficiency of operations, minimize manufacturing costs, effectively move, store, and track goods in a supply chain, and achieve customer satisfaction.
Effective supply chain management aims to fulfill customer demands, ensure product availability, improve quality, reduce defects, improve the bottom line, and build a good supply chain network.
Logistics operations management is crucial in forecasting risks related to transportation, inventory management, and lead times. Supply chain managers integrate logistics into their supply chain to gain these valuable insights and protect their business operations from costly disruptions.
Automated logistics management systems enable supply chain leaders to monitor supply chain performance in real-time, helping them streamline supply chain operations and improve performance.
SCM Is a High-Level Process, and Logistics Is More Day-to-Day.
Logistics management mostly involves short-term goals such as the storage and transportation of goods (for example, shipping finished products from Point A to Point B in a timely and cost-effective manner). It also includes achieving customer satisfaction and creating partnerships with external partners.
On the other hand, supply chain management deals with long-term functions like gaining a competitive advantage and driving long-term business growth. It also involves controlling cost allocation and the management of supply and demand.
Sifted is the Next Best Thing for Future-Focused Logistics Management
Logistics management is responsible for coordinating and managing the overall flow of sourcing, production, and delivery of finished products to the end customer, whereas supply chain management focuses on the storage and movement of products inside and outside the organization.
We at Sifted understand that logistics is the backbone of parcel shipping for any modern business, and supply chain visibility at the core of your business success.
Sifted Logistics Intelligence makes advance data-science analytics easy to understand so that shippers can take actionable insights for smarter shipping. A 360-degree view of your shipping can help you to lessen unnecessary spending by optimizing your carrier agreement and reducing errors—leading to stronger logistics management.
Get cost savings ideas for your business using a modern logistics dashboard. Get a free demo from Sifted!