Difference Between Logistics and Supply Chain Management

Logistics and Supply Chain Management have become incredibly advanced, especially considering today’s demand-driven economy.

Given their importance in the overall movement of goods, both of these terms are commonly interchanged. However, supply chain management and logistics are separate entities given their own specialized functions. ISM (Institute for Supply Management) is the oldest, and the largest, supply management association in the world. ISM CEO Thomas W. Derry describes the difference as such:

“Procurement and logistics are responsible for getting the right thing (including the right specifications, the right quality) at the right (total) cost from the optimal source or sources. Supply chain is the implementation of the procurement strategy.

Definition: Supply Chain Management

SCMA (Supply Chain Management Association) defines supply chain management (SCM) as:

The process of strategically managing flows of goods, services, finance and knowledge, along with relationships within and among organizations, to realize greater economic value through:

  • Supporting enterprise strategic objectives
  • Contributing to the achievement of strategic competitiveness of the enterprise
  • Contributing to the enhancement of the competitive advantage of the enterprise
  • Enhancing customer satisfaction

Definition: Logistics

According to the Council of Supply Chain Management Professionals, logistics is:

“the part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements”

Leading in Logistics

Logistics is more than a simple function of supply chain management. Just as this Science Direct study describes, we believe logistics operations contribute to something much bigger. And that’s because a well-organized logistics and supply chain management facility brings to market “a qualified advantage over other economies, whereas improving logistics infrastructure may serve as a competitive tool [that’s] also effective in rising market share”.

Supply Chain Management Operational KPIs

In order to find and maintain successful operations, supply chain management operations need to establish strong KPIs. According to the Logistics Bureau, some of these KPIs could include performance reports on such things like gross profit, logistics costs, costs of products, inventory levels, fiscal losses, the quality of hired trucking companies here in Vancouver, and more.

Third Party Logistics (3PL) KPIs

There’s power in the data. This data relates to all logistics’ operations including shipping time, delivery time, order accuracy, freight transportation services costs, warehousing and distribution costs and more. By monitoring specific KPIs a provider can make any necessary changes for improvement. After all, competition is fierce and delivery times continue to get faster.

The Future of Supply Chain Management and Logistics

Standards set by companies distributing goods within shorter periods of time have set the bar higher for both SCM and logistics. With this said, anyone who wants to keep up will have to embrace the latest technology. This trend shows no signs of abating and can been viewed as a positive opportunity for growth.

Technology is the key to our future success within all areas of SCM. According to a Research Gate report, the success of a SCM relies largely on the willingness to “adopt Internet technologies and business models”.

Third party logistics providers are evolving with technology to provide innovative software to meet customers’ needs. This includes the latest software reporting, EDI interface to customers’ systems, RF technology and bar coding along with web-based inventory transaction and levels tracking. Working with technology driven solutions to manage customers’ inventory results in the timely flow of product.

With the world of warehousing and distribution services constantly advancing, local logistics and SCM will need more experts who are eager to optimize the entire chain.

Supply Chain Spectrum Leadership

According to an Inbound Logistics article, “While leadership capabilities are important in all business disciplines, the unique challenges in the logistics and supply chain arena make them a critical part of achieving results.”

Although logistics and SCM hold different definitions, leadership is needed within logistics to induce success within the entire chain – according to Inbound Logistics. “Logistics leadership is critical for companies seeking to establish competitive advantage through supply chain management and logistics” the article continues.

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A consideration of these two terms, their meanings and differences, provides a proper focus for the supply challenges now facing Canadian logistics in our increasingly competitive world and economy. Those who can embrace the latest in global trends in order to get their goods to market will be able to compete on an international scale, contributing to an industry even bigger than they ever imagined it could be.

2018-12-17T12:12:27+00:00November 28th, 2018|