Logistics and Supply Chain Interrelated
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The terms “Supply Chain” and “Logistics” are often used interchangeably by people around the globe. Naturally, this can prompt a lot of perplexity among individuals who are trying to define their objectives, mainly because these are different areas. Every one of them includes various obligations, deliverables, and procedures. The confusion is that people consider logistics and supply chain management to be the same thing. However, logistic operations are part of the whole supply chain management.
What is Supply Chain Management?
Supply chain management, as explained by Michigan State University professors in the text Supply Chain Logistics Management, involves collaboration between firms to connect suppliers, customers, and other partners as a means of boosting efficiency and producing value for the end consumer. The textbook considers supply chain management activities as strategic decisions, and set up “the operational framework within which logistics is performed.”
It is the efforts of a number of organizations working together as a supply chain that helps manage the flow of raw materials and ensure the finished goods provide value. Supply chain managers work across multiple functions and companies to ensure that a finished product not only gets to the end consumer but meets all requirements as well. Logistics is just one small part of the larger, all-encompassing supply chain network.
What is Logistics?
The Council of Supply Chain Management Professionals defines logistics as “part of the supply chain process that plans, implements and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer’s requirements.”
In Supply Chain Logistics Management, Michigan State University’s professors define logistics as activities – transportation, warehousing, packaging and more – that move and position inventory and acknowledge its role in terms of synchronizing the supply chain.
The objective behind logistics is to make sure the customer receives the desired product at the right time and place with the right quality and price. This process can be divided into two subcategories: inbound logistics and outbound logistics.
Inbound logistics covers the activities concerned with obtaining materials and then handling, storing and transporting them. Outbound logistics covers the activities concerned with the collection, maintenance and distribution to the customer. Other activities, such as packing and fulfilling orders, warehousing, managing stock and maintaining the equilibrium between supply and demand also factor into logistics.
It is important to remember that while the terms should not be used interchangeably, they do supplement each other. One process cannot exist without the other. Here are some key differences between the two terms that will help you keep from blurring the lines between them.
- Supply chain management is a way to link major business processes within and across companies into a high-performance business model that drives competitive advantage.
- Logistics refers to the movement, storage, and flow of goods, services and information inside and outside the organization.
- The main focus of supply chain is a competitive advantage, while the main focus of logistics is meeting customer requirements.
- Logistics is a term that has been around for a long time, emerging from its military roots, while supply chain management is a relatively new term.
- Logistics is an activity within the supply chain.
While Supply Chain is an end to end practice, the thing that comprises of the process and the positions, logistics is a process that starts with a requirement and completes with the satisfaction of that prerequisite. In business, logistics plays the role of how to get something from point A (routinely, the provider, or source) to point B. From a company’s point of view, it incorporates procedures, for example, collecting, transportation, taking care of, and quality affirmation, among others.
Numerous components play crucial roles in a logistical structure; for instance, costs and volumes are audited to ensure they satisfy the requirements. Quality confirmation manages the exactness of what is being procured and shipping & handling the time that takes to move the things from transportation point to the conveyance point.
Logistics play a crucial role to ensure extraordinary levels of productivity since it can lessen the time it takes to get what is being demanded in the hand of those that are manufacturing or delivering the goods and services to the final customers.
Hence we must understand that a supply chain will define the company’s entire portfolio of suppliers, suppliers’ suppliers, distributors/ whole-sellers, and consumers in the end. It is an overall matter of flow of materials, money, and information, to and fro. But logistics is a particular part of the whole supply chain, which only deals with order taking and delivery of materials, including transportation.