Supply Chain vs. Logistics: Definitions, Similarities, and Differences
As companies continue to grow, it is important to understand the differences between supply chain and logistics. Although related, the two have distinct attributes that can substantially influence how businesses manage their activities.
This article explores supply chain vs. logistics – what they mean, how they differ from each other, and the integration opportunities. The article also provides best practices for optimizing supply chains and logistics processes. Let’s dive into this complex yet fascinating topic.
What Is a Supply Chain?
A supply chain is the network of organizations, people, activities, information, and resources necessary for moving a product or service from supplier to customer. It encompasses all the steps required to create and deliver a product or service, including procurement, production planning and control, inventory management, warehousing, and distribution.
Supply chain management works to guarantee delivery at the most economical cost while fulfilling consumer needs to increase customer satisfaction.
Role of the Supply Chain
The supply chain process is an integrated system used by companies to:
- Source raw materials
- Manufacture components
- Assemble finished goods
- Distribute finished goods through retail outlets or direct-to-consumer channels
- Provide after-sales services such as repairs or returns processing
A successful supply chain requires coordination among multiple parties across different stages to achieve maximum efficiency.
What Is Logistics?
Logistics enables the planning, implementing, and efficient flow of goods and services from their point of origin to their destination. It manages resources in a way that meets customer needs while minimizing costs. Logistics can be broken down into three main components: transportation, warehousing, and inventory management.
Role of Logistics
Transportation involves the conveyance of items from one destination to another by land, air, or sea. This process requires selecting carriers for shipments and scheduling pickup/delivery times.
Warehouses store products until they are needed either at a distribution center or at retail locations. Inventory management tracks stock levels to ensure there is enough product available when needed but not too much in order to prevent the costs associated with excess inventory.
The advantages of logistics management are varied, from reducing operational costs through greater efficiency to enhancing customer satisfaction due to faster delivery options. Global supply chain visibility is enhanced, with companies able to track orders more effectively and respond quickly to changing market conditions.
Control and Plan
An established system for control and planning is essential for risk reduction, distribution, transportation, and storage. Risk is managed through improved safety measures including temperature control during transit. These measures ultimately lead to higher profits by making the most effective use of resources including labor, materials, and space.
Logistics is an intricate, continually transforming process necessitating thoughtful analysis of its various elements to guarantee effective performance overall.
Transport and Storage
The administration required for the delivery, storage, and transportation of products is extensive. These administrative protocols involve intricate planning, organization, and the execution of several procedures to guarantee the efficient movement of both goods and information.
Since warehousing logistics are an integral part of the overall supply chain, it’s essential to have a well-defined logistics management system. It typically comprises packing and shipping orders while providing storage for finished goods. Orders are supplied on time if the inventory is in controlled logistics storage.
Distribution
The term “distribution logistics” refers to the methods used by the broader logistics sector, such as a way to efficiently complete orders. Every stage of the fulfillment process is covered:
- Receiving orders from online merchants through the organization of the fulfillment center
- Management of the logistics center
- Transportation logistics through inventory control and distribution channels
Types of Logistics
Here are the different types of logistics that companies may choose to implement.
1. Inbound Logistics
Inbound logistics involves the movement of goods from suppliers to warehouses and other locations for storage or further processing. It includes activities such as purchasing, receiving, inventory control, warehousing, and transportation.
2. Outbound Logistics
This type of logistics focuses on delivering finished products to customers in a timely manner and involves order fulfillment, packaging, shipping, and delivery services.
3. Reverse Logistics
Reverse logistics deals with the return or disposal of products that are no longer needed by customers or businesses due to obsolescence or damage. It encompasses returns management, repair/refurbishment, and recycling/disposal services.
4. Third-Party Logistics (3PL)
As the name suggests, third-party logistics involves outsourcing all or part of an organization’s supply chain operations to another provider. The 3PL provider will likely specialize in managing specific functions efficiently, such as supply chain troubleshooting on behalf of their clients. 3PL covers warehousing, transportation, and distribution services.
Similarities Between Supply Chain and Logistics
Logistics and supply chain management both place an emphasis on the movement of commodities from the point of origin to the final destination. To ensure that products can travel through the supply chain as needed, both disciplines have to be carefully coordinated to optimize the use of resources, personnel, and facilities.
Differences Between Supply Chain and Logistics
Supply chain and logistics are two concepts often used interchangeably, but there are differences between them.
Scope and Focus
The supply chain is a broader concept than logistics, as it encompasses the entire process of getting goods from the supplier to the customer. That includes planning, sourcing, production, distribution, and delivery.
Logistics focuses more on the movement of goods from one place to another. Its processes extend to warehousing, transportation management, inventory control, packaging design, and materials handling.
Supply chain management works to guarantee that goods arrive at their destination quickly while keeping expenditures related to production or delivery as low as possible. On the other hand, logistics focuses on optimizing resources for cost-effectiveness while ensuring that product quality standards are maintained throughout all stages of transport or storage.
Management Strategies
A collaborative supply chain network is essential for success. Well-organized supply chain management professionals must actively work with teams across several departments, such as procurement or sales. Logistics relies heavily on technology solutions, like automated systems for tracking shipments or forecasting demand patterns, to streamline processes and improve efficiency levels.
Though both supply chain and logistics have some managerial commonalities, there are also notable differences between them. By integrating these two disciplines, organizations can gain a competitive edge in their respective industries.
Why Is Logistics Training Important to Supply Chains?
Logistics and supply chain management each serve customer needs and enhance the customer experience. Customer demand is directly reflected in logistics. SCM makes use of this information to forecast production and inventory levels and to understand what customers desire.
The path to effective supply chain management is paved by reliable, cost-effective logistics. Orders that are accurately and promptly filled as a result of a well-managed supply chain can draw in new customers and boost revenue.
Multiple organizations have come to understand the competitive advantage gained by utilizing supply chain management software to streamline their supply networks. This software can integrate different parts of the supply chain to meet rising customer expectations while maintaining stable prices.
In fact, the software has been used as a helpful aid for sourcing, production planning, inventory management, and order management. It can offer in-depth reporting about numerous facets of business operations to draw attention to potential issues or identify opportunities for process improvement.
FAQs
Here are some of the most commonly asked questions regarding logistics and the supply chain.
What are the 4 types of logistics?
The four types of logistics include inbound, outbound, reverse, and third-party logistics. These types all refer to a different part of the product journey.
Conclusion
In conclusion, the supply chain process and logistics are two distinct yet closely related concepts. While both involve the management of resources and goods, they differ in their overall scope and purpose.
In learning about supply chains, it is helpful to review companies who have implemented effective supply chains. The 10 Best Supply Chain Companies of 2021 is a good place to start.
Supply chains focus on the overall flow of materials from supplier to customer, while logistics focuses on the efficient movement of those materials. With proper planning, companies can leverage the power of supply chain management and logistics to achieve success in today’s competitive marketplace.