What is the Difference Between Logistics and Supply Chain Management?

The difference between logistics and supply chain management (SCM) is they maintain a blurred boundary. They exist in the sense that they are different concepts. But the difference is not too marked, and in some aspects they share functions. There is no radical barrier or divide between them, although there are notable differences between the two concepts. This is because the former is necessarily included in the latter and because we often find that these are very subtle, almost theoretical differences, without a markedly practical reflection when working.

However, at a strategic level, in the global and high-level decisions of a company, it needs to be made clear whether we are going to focus on logistics or on integrating one or more parts of the supply chain.

So for the sake of making the right decisions, you need to have a clear understanding of the difference between logistics and supply chain management. This blog presents exactly this information in simple language. Read on!

What is Logistics and Supply Chain Management?

What is Supply Chain?

Supply chain management is a cross-cutting and multidisciplinary concept. Put simply, the supply chain is what controls the flow of the entire process, from storage through distribution until reaching the final delivery of the product. Therefore, SCM encompasses, in addition to logistics, other functions such as:

• Procuring raw materials.
• Planning and production.
• Product development.
• Order taking and logistics.
• Customer service (even after sale).
• Performance monitoring.
• Integration and sharing of information between components of the chain.

What is Logistics?

However, logistics management is only one aspect of supply chain management. Its activities focus on:

• Inbound and outbound transportation management.
• Fleet management.
• Supplier management.
• Materials management.
• Product storage.
• Inventory management.
• Order fulfilment.
• Supply and demand planning.
• Logistics network design.

Despite everything, what is logistics and supply chain management remains a common question, as they are very similar concepts that sometimes merge. If we had to bet, we’d bet that in the future we’ll only talk about supply chain management. However, today they are still concepts that differ in many important aspects that affect their functions. Let’s look at some of the most notable ones.

Key Difference Between Logistics and Supply Chain Management

Let’s see the difference between logistics and supply chain management based on multiple factors.

Regarding Resources

The technology required for proper management is one of the major differences between logistics and supply chain management. Logistics is an old and established term that can still survive today with limited technological resources or with widely dissimilar combinations of old methods with more modern ones. However, truly addressing supply chain management requires determination and, above all, a large dose of technology. If you are looking to make your supply chain more efficient in your construction projects, learn about NYGGS Construction Supply Chain Software.

Regarding Integration

Logistics management doesn’t deal with the integration of processes between different entities, but supply chain management does. If it doesn’t exist, it tries to create it, moving from logistics to supply chain creation.

Regarding the Scope of Action

Logistics management is limited to the scope of a single organisation, whereas to discuss and manage a supply chain, we need to broaden our vision and coordinate actions, resources and objectives across multiple organisations. This requires close collaboration between suppliers, distributors, and customers.

Regarding the Objectives

While the goal of logistics is to deliver goods to customers on time, error-free and at a competitive price, the goal of SC is to create a competitive advantage for all members by achieving an efficient and effective element overall.

Regarding Planning

The difference between logistics and supply chain planning is that logistics is about delivering a product quickly, right the first time, i.e., to the right place, at the right time, to the right customer. SC planning is about all the actions and processes involved from end to end, from the point of origin to the point of consumption, to meet customer expectations.

Regarding the Actions

One of the main differences between logistics and supply chain management is that the former is responsible for controlling actions such as warehousing, inventory control, packaging, meeting deadlines, orders, etc., while the latter deals with a set of strategic actions with a more comprehensive approach, from the movement of raw materials, semi-finished products and intermediate processes to the customer.

Regarding Belonging

Each organisation has its own, almost endemic, approach to logistics management. It has a specific level of service, specific deadlines, a specific mode of transport, etc. From a supply chain perspective, which is more comprehensive, each organisation can be part of one or more supply chains at the same time. This great advantage is also a source of management complications.

Regarding Visibility

By definition, logistics only sees what is happening within its scope, whereas SC demands complete visibility across each and every one of its components. This is the basis of its value creation potential. Each link needs to see what’s happening in the rest. This is essential for its proper functioning. SC must be able to see everything that is happening in real time in each of the logistical operations of all its links.

Regarding The Benefits

Given the broader scope and impact of supply chain management, its benefits are far greater than those potentially achievable through logistics. The supply chain creates scenarios that foster connections and collaboration between entities, new and better ways of working together for mutual benefit, improvements in finding solutions to common or uncommon problems, and much more stable and lasting relationships not based solely on price.

Table: Differentiating Aspects Between Logistics and Supply Chain Management

Summarising the Difference Between Logistics and Supply Chain Management

We can summarise that logistics is part of the supply chain, whose assigned tasks are to manage: storage, transportation of incoming and outgoing goods, monitoring of owned and non-owned transportation, inventory management, order preparation, and supplier management. In other words, logistics is a highly operational activity in all areas it handles. Understanding this makes it easier to differentiate between logistics and supply chain management.

Although both processes operate individually, they have common activities: planning, supply, transportation, warehousing, inventory, trade and services, and customer management. Their convergence to optimise their processes requires a culture of value, customer focus, outsourcing development, partnership development, formal logistics organisation, flexibility, responsiveness, strategic plans, and a wealth of creativity.

Supply chain management encompasses functions beyond logistics, as its activities extend from before the product’s birth to the end of its life, including the supervision of the logistics process. Additionally, globalisation continues to advance, further developing trade and placing greater demands on supply chains to harness technology and information, mobilise greater offerings, and improve all processes, especially by relying on quality logistics that is in line with market demands.

Companies must overcome the confusion between logistics and supply chain management to improve processes and assign the corresponding responsibilities so that, at the end of the chain, there are many satisfied customers: greater quantities of material, less time, and the lowest cost.

Frequently Asked Questions