Many companies struggle with logistics management because they don’t understand how supply chain management works. They also fail to see the benefits of using both types of systems together.
In order to succeed as a company, you must manage logistics and supply chains effectively. This means managing inventory, transportation costs, customer service, and many other aspects of running a business.
If you’re not sure where to begin, then read this article to learn the difference between logistics and supply chain management. Then, get started implementing these two important processes in your business today!
What is Logistics Management?
LM is often used when companies need to move large quantities of items quickly and efficiently. The term logistics comes from the Latin verb logare meaning ‘to arrange’.
When we talk about logistics, we’re talking about the entire process of moving things from point A to B. This includes everything from shipping containers to trucks to warehouses to stores.
There are many different types of logistics management systems. Some are automated, some require manual intervention, and others are completely integrated.
LM is a critical component of any successful business. Without proper logistics management, businesses would be unable to meet customer expectations, deliver goods on time, or keep prices competitive.
When done well, LM helps companies save money, improve quality, reduce risk, and enhance customer satisfaction.
What is Supply Chain Management?
Supply chain management (SCM) is the process of managing the flow of goods through various stages of production and distribution. This includes planning, organizing, scheduling, controlling, monitoring, and evaluating activities along the supply chain.
When we talk about SCM, we’re talking about the entire life cycle of a product, not just the last stage of manufacturing. The goal of SCM is to ensure that every step of the supply chain runs smoothly and efficiently.
There are many different types of SCM processes. Some companies use a single point of contact to oversee the whole process. Others may use multiple points of contact at each stage of the supply chain. Still others may use a combination of these methods.
Regardless of the method used, SCM helps companies reduce costs, improve quality, and speed up delivery times.
How is Logistics Management different from Supply Chain Management?
Supply chain management (SCM) and logistics management (LM) are two terms used interchangeably in most industries. However, SCM focuses on the flow of goods and materials within an organization whereas LM deals with the movement of those same items between organizations. Let’s explore the differences between SCM and LM.
1. Scope
SCM is much broader than LM. This means that SCM encompasses all aspects of the supply chain, whereas LM focuses on the transportation aspect of it.
For example, SCM would include the following areas:
• Procurement
• Production
• Distribution
• Transportation
• Storage
• Customer service
Whereas LM would focus on the transportation aspect of each of these processes. For instance, LM would include the following areas of the supply chain:
• Inventory control
• Order processing
• Shipping
• Receiving
• Delivery
• Return shipping
• Payment processing
• Accounting
• Customer service
2. Focus
While SCM is broad, LM is narrow. As mentioned above, LM focuses solely on transportation. Therefore, SCM has a wider range of responsibilities than LM does.
However, LM is still extremely valuable to any company. Because LM is focused on the transportation aspect of operations, it provides companies with insight into the efficiency of their transportation systems.
This allows companies to improve their overall performance and become more efficient.
3. Skillset
Because SCM is so broad, it requires a wide variety of skillsets. Companies may employ individuals with expertise in procurement, production, distribution, customer service, accounting, inventory control, order processing, shipping, receiving, delivery, return shipping, payment processing, and/or customer service.
On the other hand, LM requires a narrower set of skillsets. These include knowledge of transportation methods such as railroads, trucks, ships, planes, and automobiles.
Companies often hire individuals with specific skill sets to manage their transportation departments.
4. Processes
SCM’s processes are often more complex than that of LCM. This is because SCM involves multiple steps and stages throughout the supply chain.
In addition, SCM includes activities like procurement, production, distribution and customer service. Each of these processes have their own unique procedures and requirements.
Logistics management (LM), however, is relatively simple. It only involves the transportation aspect of the supply chain.
Therefore, LM usually consists of one or two processes .
5. Goals
SCM aims to optimize the entire supply chain. This includes optimizing the flow of products, services, information, money, people, etc., through the supply chain.
LM, on the other hand, is concerned with optimizing the transportation process.
Therefore, while both SCM and LM aim to achieve similar goals, they do so by focusing on different things.
6. Metrics
SCM uses metrics to measure its success. The main metric for SCM is cost reduction.
It measures how well the supply chain functions and whether or not it can reduce costs.
LM, on other hand, uses metrics to measure its progress. The primary metric for LM is time savings.
It measures how efficiently the transportation system operates and whether or not it saves time.
7. Cost Savings
SCM strives to save money. However, it also tries to maximize profits.
For example, if a company reduces its transportation costs, but increases its operating expenses, then it will likely lose money.
LM, on contrast, seeks to save time. It doesn’t exactly care about maximizing profits.
8. Responsibilities
SCM is mainly concerned with the movement of goods within an organization. Therefore, it is responsible for ensuring that the right amount of inventory is available at the right place at the right time.
It also handles the shipment of goods to customers and returns of damaged or defective items.
On the other hands, LM is responsible for the movement of goods between companies and entities. It is responsible for handling the whole life cycle of a product from its inception to its delivery to customers, including ordering, manufacturing, packaging, shipping, receiving, and billing.
9. Tools
SCM relies heavily on technology. It uses computers, software, databases, and networks to perform its tasks.
However, LM also uses technology but is less reliant on it. Instead, it relies on paper, pen, and human resources.
10. Benefits
SCM provides many benefits to organizations. For instance, it helps them improve productivity, increase efficiency, lower costs, and increase revenue.
SCM also enables companies to better understand their customers’ needs. They can use this data to make decisions about what products to produce and where to sell them.
On the other hand, LCM allows companies to manage all aspects of their logistics operations in one location.
This means that they can easily track shipments, order supplies, and keep records.
Which should you choose? Logistics Management or Supply Chain Management?
Choosing between logistics management or supply chain management might seem like a tough decision. But once you understand their differences, you’ll realize that both have their place in any company’s operations. The key is to understand what your business ultimately needs and what it can actually handle.
If you are still unsure of what to choose between Logistics Management or Supply Chain Management or if you need both, a third-party perspective may be beneficial. They can help in identifying areas of concern and suggest ways to resolve them. They can also provide insight into which type of management would work best for your particular situation.