Logistics vs Supply Chain Management
It is common to find professionals in the fields of logistics, supply chain management, and related areas using the words “logistics” and “supply chain management” interchangeably. However, the two terms are not synonymous, although they are related.
"Supply Chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer" - Martin Christopher
The primary difference between the two is that logistics focuses on the movement of goods and services throughout a network, while supply chain management focuses on all aspects of coordination between partners involved in such a network.
"Logistics is about getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time, and at the right cost (the 7 Rs)" - John J. Coyle et al
Logistics refers to the movement, storage, and flow of goods and materials within a supply chain. It encompasses all activities required to move a product from a supplier to a customer. Supply chain management (SCM), on the other hand, refers to activities needed to coordinate all partners involved in this network to achieve a competitive advantage, including but not limited to sourcing, manufacturing, transporting, storing, and selling. SCM is a broader term as it includes additional functions beyond simply moving goods from point A to point B.
The Council of Supply Chain Management Professionals defines logistics as “part of the supply chain process that plans, implements and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption to meet customer’s requirements."
Supply Chain Evolution
Logistics has been around for centuries but has evolved greatly in its practice since the turn of the 20th century.
Supply chain management is a relatively new concept that emerged during the 1980s when businesses sought to improve their cross-functional integration (e.g., between sales and manufacturing). In an effort to capitalize on efficiencies gained from these improvements in coordination between functions within their companies, some businesses began to seek out additional benefits by coordinating with other companies in their supply chains (e.g., suppliers and distributors)
Before I conclude, allow me to briefly introduce what transportation and logistics are.
“Transport and logistics encompass two distinct types of activities: traditional transportation services such as air, sea, and land transportation, warehousing, and customs clearance, and value-added services such as information technology and consulting.”
As supply chains become more global in nature and involve more extensive networks of transportation service providers, transportation management systems (TMS) have become important tools for shippers to streamline their operations and achieve sustainable competitive advantages. This has also led to more sophisticated inventory control systems that help companies manage their inventory levels across extended networks that straddle multiple countries.
Purchasing, materials handling, logistics, transportation, inventory control, and supply chain management have all evolved, resulting in the intersection of many of these functional areas. As a result of this intersection, some of these terms, such as logistics and supply chain management, have become muddled in their definitions.
Thus, “While many people use the terms supply chain management and logistics interchangeably, the two terms refer to distinct (but related) activities.”