What comes to mind when you hear “logistics and supply chain”? Not only do they appear to mean the same thing, but they are also sometimes used interchangeably.
However, there is a slight difference between them. Supply chain management is a new and modern concept, which logistics management only happens to be a part of. These two terms should not be confused.
Logistics management is a fraction of supply chain management. Supply chain management is a much broader term. Logistics combines the flow of goods, services and information, from its raw state to the final consumer. Supply chain management on the other hand is associated with the procurement of raw materials and consumer requirements, conversion of raw materials into final products and delivery to the consumer.
The main objective of logistics management is customer satisfaction, while the goal of the supply chain is a competitive advantage. In an organization, supply chain management is literally the coordination and movement of supply chains, while logistics management is the flow and storage of goods.
Another major difference is that logistics management usually involves just one organization, whereas the supply chain is made up of multiple organizations that are involved in the coordination of suppliers, distributors and customers.
In other words, supply chain management involves a series of interconnected activities with regards to the procurement and movement of raw materials till it become finished goods and reaches the end-user. The aspect of reaching the end-user is where logistics management comes in. Logistics management has to do with warehousing, packaging, order fulfilment and stock management of those finished products on the way to the end-user.
Effective supply chain management ensures the consistent and prompt arrival of raw materials at manufacturing production facilities, preventing the need to source additional materials from alternative sources, and subsequently preventing lower profitability. Logistics is clearly an essential component of supply chain management. It is the aspect that completes the supply chain. The role of logistics in supply chain management is, therefore, to ensure the smooth operation of all parts of the supply chain.
The aim of this article is to help you differentiate between these two concepts and not mix them up or use them interchangeably as it is commonly done.