Logistics and Supply Chain Management

What’s the Difference Between Logistics and Supply Chain Management?

You’ve heard the terms logistics and supply chain management thrown around, and sometimes you even hear them used interchangeably. What’s the difference? Is there really a difference? Here’s the answer to this commonly asked question, broken down for simplicity’s sake.

What is Logistics?
Logistics is essentially the movement of goods and information through the supply chain. It encompasses warehousing (storage, order filling, shipping and receiving functions), transportation, and the collection and analyzation of the data generated therein.

Logistics is typically handled in house or contracted out in whole or in part to a 3PL provider. Logistics managers tend to work within their function. Logistics is often broken down into two subsets: inbound and outbound. Inbound logistics brings goods and/or materials into the company. Outbound logistics gets goods to their final destination.

What is Supply Chain Management?
Supply chain management is a comprehensive term that includes every part of getting goods to market. It includes research and development, procurement and sourcing, manufacturing, logistics, and customer relations.

Supply chain management generally involves multiple organizations. Supply chain managers likely work across several functions, bringing together information and strategy from these various functions in an effort to cut costs.

What’s the Difference?
It’s important to note that expert ideas on this subject are a little scattered, and it’s not really as simple or concrete as one might hope. Some say that logistics is a subsector of supply chain management, some say that supply chain management is a new, more comprehensive version of logistics, and in Europe, what we’d call supply chain management in the States is known as logistics management.

Those who say that logistics is part of supply chain management are essentially correct. Supply chain management does involve logistics, but it also involves several other disciplines within the supply chain. This means that logistics is part of supply chain management, and supply chain management isn’t just logistics.

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Independent research shows that improved supply chain management can yield:

  • 25 – 50% reduction in total supply chain costs
  • 25 – 60% reduction in inventory holding
  • 25 – 80% increase in forecast accuracy
  • 30 – 50% improvement in order-fulfillment cycle time
  • 20% increase in after-tax free cash flows
  • Supply Chain Mapping

  • Review Market Conditions

  • Determine Operational Inefficiencies

  • Outline Opportunities

  • Implement Changes

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