The Difference Between Logistics and Supply Chain Management

The global supply chain management market is expected to expand at a rate of 10.9% between 2022 and 2030. Businesses of all types are recognizing the importance of logistics and supply chain management. 

Many businesses have used the terms interchangeably. However, logistics & supply chain management aren’t the same. They have some overlap, but their focuses and the activities you’ll take with each one are a bit different.

In this guide, we’ll tell you more about the difference between logistics and supply chain management.

Logistics vs. Supply Chain Management

Despite what you might expect, logistics and supply chain management aren’t exactly the same.

Simply put, supply chain management (SCM) is a larger strategy that includes processes such as logistics. It also includes everything that comes along with sourcing, procurement, and coordination of supply chain activities.

Logistics fits under the umbrella of supply chain management. Logistics is all about the movement of goods internally while supply chain management expands on this. SCM also encompasses the purchasing, production, and distribution of products and goods at various parts of the supply chain.

SCM includes the coordination of all of the parts that are involved with the supply chain such as working with partners as well.

All of the separate parties that are involved in an organization’s supply chain will be the focus of supply chain management. It doesn’t just include the movement and storage of goods internally like with logistics.

Similarities Between SCM and Logistics

Although SCM and logistics are different, there’s a lot of overlap between them.

Both of these processes are focused on facilitating the flow of goods from beginning to end. Each of these disciplines will be used to coordinate the labor, storage, and movement of goods.

Here are some of the main similarities between these two types of disciplines:

• Both of these focus on the flow of goods or services between suppliers, manufacturers, wholesalers, and consumers
• Both processes aim to improve overall customer service and satisfaction
• Each of these works to increase competitive advantages and improve the success of a company

It’s easy to see why there’s confusion surrounding logistics and supply chain management. The terms are often used interchangeably because they do have a lot of similarities overall.

Key Differences to Know About

Although there are a lot of similarities between supply chain management and logistics, the devil is in the details. As mentioned above, supply chain management is actually a larger term that contains logistics within it.

Activities to Perform

The activities that logistics and SCM covers are each a bit different.

A supply chain management program includes many different activities. It includes the planning of production, inventory, and labor needs. Focusing on all of these together helps to perfect the supply chain.

Also, supply chain management includes the management of facilities and materials. It includes the sourcing and production of goods and services.

Supply chain management activities also include logistics. Logistics focuses on the efficient transport and movement of goods to a customer.

View of the Supply Chain

A key difference to understand is that SCM takes a wider view of the management of goods than logistics does.

Logistics is only related to the internal movement of goods within a business while SCM focuses on a lot more. SCM focuses on the sourcing of raw materials. It focuses on the movement between all parties involved with manufacturing and the distribution of a product or service.

In simple terms, SCM takes a much wider view and takes all of the variables into account. Elements of logistics, on the other hand, only focus on the movement and storage of goods and their delivery to the consumer.

Number of Organizations

Another thing to realize about supply chain management and logistics is that the number of parties involved is different.

Generally speaking, logistics concerns itself with just a single organization. It’s all about the internal movement of goods. It doesn’t take into account all of the other connections that go into the supply chain.

On the other hand, SCM takes stock of all of the different parties that are involved with business goods. This includes suppliers, distributors, intermediaries, customers, and more.

Focus on Customer vs. Competition

SCM tends to be more focused on providing a company with a competitive advantage. To a lesser extent, it aims to improve customer satisfaction.

SCM focuses on higher operational activities. These boost a business and help it perform better when compared to competitors.

In contrast, a logistics management strategy is primarily focused on efficiently delivering goods to customers. As a result, logistics aims to improve the satisfaction of customers and their impression of your company.

Origins

Logistics has been around for centuries and originated with the military in the time of Alexander the Great. It’s not a new term. It has been used in both military and business for a long time now.

Supply chain management, on the other hand, is a much newer concept and was introduced in the 20th century. It hasn’t been practiced as long as logistics has been.

The Ford Motor Company helped to establish supply chain management with the introduction of production lines into business. However, the term was coined in the early 1980s.

Understanding the Difference Between Logistics and Supply Chain Management

By now, you should have a better understanding of the difference between logistics and supply chain management. Although logistics is a part of supply chain management, there’s also a lot more to SCM that you’ll need to understand when managing your business.

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