Difference Between Logistics and Supply Chain Management

Have you ever wondered why some companies consistently outperform their competitors? The answer often depends on their ability to manage logistics and supply chain operations effectively. According to research, 79% of companies with high-performing supply chains have higher revenue growth compared to the industry average. This shows the role that effective logistics and supply chain management play in driving profitability in businesses. 

In this blog post, we will clarify the difference between logistics and supply chain management, and their similarities. Also, we’ll explore some examples to help you understand how they contribute to organizational success.

Understanding Logistics 

Logistics is the process of managing the flow of goods and services from their original point to the ultimate customer. It involves a series of activities that ensure that products are transported, stored, and delivered in a timely and efficient manner. Key logistics functions include:

• Transportation: Moving goods from one location to another.
• Warehousing: Storing products until they are needed.
• Inventory Management: Keeping track of stock levels to meet customer demand.
• Order Fulfillment: Ensuring that customer orders are processed and delivered accurately.

An effective logistics system reduces cost and enhances customer satisfaction by ensuring resources are available when and where they are needed.

Understanding Supply Chain Management

Supply chain management (SCM) covers a broader scope than logistics, focusing on the entire lifecycle of a product. This includes sourcing raw materials to delivering finished goods to customers. Key components of supply chain management include:

• Planning: Strategizing how resources will be sourced and used.
• Coordination: Ensuring that all parties work together seamlessly.
• Optimization: Continuously improving processes to reduce costs and enhance efficiency.

Note: When it comes to logistics and supply chain management, logistics involves areas like transporting and warehousing. On the other hand, supply chain management includes all activities that improve efficiency, reduce costs, and enhance customer satisfaction.

Key Differences Between Logistics and Supply Chain Management

Though closely related, logistics and supply chain management are very different in functions. In short, logistics deals with the movement and storage of goods, while supply chain management provides an entire chain of activities, from procuring raw materials to manufacturing products and delivering to end consumers. Understanding the difference between logistics and supply chain management enables companies to achieve better operational efficiency and make better decisions.

The following table explains the difference between logistics from supply chain management in terms of their scope, objectives, components, and performance indicators:

Parameter	Logistics	Supply Chain Management
Definition	Focuses on having an efficient flow and storage of goods and services at the origin-to-consumption process points.	Controls the entire supply chain, from acquiring raw materials to the final product being delivered.
Scope	Mainly involves the transportation and warehousing of goods.	It includes functions such as production, distribution, sales, and customer service.
Components	From transportation, warehousing, and inventory management to order fulfillment.	Procurement, production, logistics, sales, and customer service are part and parcel of their activities.
Objective	Ensures efficient transportation and storage to meet customer needs.	Aims at the optimization of the supply chain in terms of cost and time for delivery.
Decision-making	Focused on operational decisions like warehousing and distribution.	Strategic decision-making pertains to production, distribution, and inventory.
Key focus area	Movement and storage of goods are optimized as they flow through the supply chain.	Supplier partners collaborate to provide customers with satisfaction and the optimization of resources.
Technological integration	Employing technology for monitoring goods and managing warehouses.	Advanced technologies for overseeing and optimizing integration.
Performance metrics	Graded on transport costs, delivery times, and warehouse efficiencies.	An appraisal of performance, customer satisfaction, and cost savings.

Pro Tip: To get a better understanding of logistics and supply chain management, consider enrolling in a supply chain logistics course with guaranteed placement. 

Similarities Between Logistics and Supply Chain Management

Logistics and supply chain management have certain similarities, which in turn, make it easier to carry out business operations efficiently. Here are some of the similarities between supply chain management and logistics:

• Customer Satisfaction: Both logistics and supply chain management aim for customer satisfaction. They do this by ensuring timely delivery of goods and services.
• Efficiency Goals: They both have the ultimate goal of saving costs, optimizing processes, and improving productivity. 
• Coordination: Both involve coordination between the joint efforts of suppliers, manufacturers, and retailers to ensure a fully efficient flow of goods.
• Use of Technology: Technology enables both functions as they use the same advanced tools for their processes. For example, inventory management systems and real-time tracking are used to monitor goods and improve efficiency.
• Interdependence: Logistics is a dimension of supply chain management since it performs all the supportive functions for distribution such as transportation, warehousing, and distribution.
• Problem-Solving: Both logistics and supply chain management require strong problem-solving skills to address unexpected challenges, such as supply disruptions, inventory shortages, or delivery delays. 

This understanding of similarities between logistics and supply chain management demonstrates how they work together to ensure the smooth running of business processes.

Examples to Illustrate Logistics vs Supply Chain Management

Examples serve as a good understanding of how logistics is different from supply chain management in real-world applications. These differences between logistics and supply chain will help businesses understand how to make informed and effective decisions.

• Example of Logistics: A retail company demonstrates logistics by managing its delivery operations. This includes ensuring that all products are delivered to the customer in the scheduled time frames. The logistics team is responsible for planning delivery routes, managing drivers, and tracking shipments.

• Example for Supply Chain Management: Imagine a company that makes smartphones. To build the phone, they need different parts, like screens, batteries, and chips. The company works with different suppliers to get these parts. They also plan when to make the phones and make sure they are shipped to stores around the world. Supply chain management means organizing all these steps, from getting parts to making the phones to getting them to stores, so everything runs smoothly and efficiently.

• Example of Integration of Both: An online store uses both supply chain management and logistics to run smoothly. Logistics focuses on quickly shipping orders to customers, making sure they get their items fast. On the other hand, supply chain management handles the rest, like making sure they have enough products in stock, predicting what items customers will want, and building good relationships with suppliers. By working together, logistics ensures fast delivery, while supply chain management ensures that the store is well-stocked and ready to meet customer demand.

These examples show that logistics focuses on certain operations, whereas supply chain management takes care of all the activities regarding smooth product flow.

Conclusion 

Logistics and supply chain management may have some similarities, but they also have very distinct and complementary business functions. Logistics deals with the efficient transit and warehousing of goods to achieve timely delivery. Meanwhile, supply chain management concerns an entire process, from sourcing raw materials to shipping the final product. Understanding these differences helps businesses optimize operations and enhance efficiency. 

To get a better understanding of how supply chain management can impact the success of a business, check out our blog on the importance of supply chain management.