Supply chain management comprises various activities like capital rights, information, products, and services from sourcing the raw material to the finished goods. On the other hand, logistics is a small part of the SCM. Today, we’ll discuss what is logistics and supply chain management; and some key differences among them.
What is Supply Chain Management?
Supply chain management is the process of dealing with the movement of production material parts and raw material from manufacturing units and delivery to the end consumer. Companies make operational SCM decisions every day all the time that impact manufacturing processes, product development, delivery, and sale. However, different types of businesses have various elements in their SC processes; some of the common elements in the SCM process are as follows;
When customers plan to buy a product/service offered by the company, then they initiate the SC process. After manufacturing the product, the production facility needs to fulfill the requirements of the sale order.
The planning unit develops a production plan for manufacturing products in order to meet the demands of customers. The company has to procure the required raw material in order to manufacture the goods.
The manufacturing department creates a list of required raw materials and sends it to the purchasing unit in order to procure the material so that the company could proceed with production.
The suppliers supply the raw material to the company for checking and evaluating the accuracy and quality of the material provided and then transfer it to the warehousing facility.
Depending on the production plan, the company transfers the material to the manufacturing unit. The production unit uses the raw material and develops the final finished goods demanded by the customers. After finishing the final product, they send it to the warehousing unit.
When the warehouses have a sufficient amount of final products, then they coordinate with the shipping department and find the most effective way to deliver the products to the end consumer.
What is Logistics Management?
Logistic management is the process of making sure the flow of material from origin to the end consumption point in order to meet the demands of customers. LM manages physical and abstract resources like time, information, liquid, equipment, animal, material, and food. However, when logistics deal with physical items, then it comprises warehousing, transportation, inventory, packing, production, material handling, and flow of information.
Often supply chain and logistics management confuse people because of the similarity among them. Logistic management comprises all of those activities that occur within the organization relevant to the delivery and distribution of the goods. On the other hand, the supply chain comprises broader activities relevant to procurement, manufacturing, collaborating in order to meet customers’ demands, retailing, and dealing with suppliers.
The focus of the operational logistic manager is to deal with issues like warehousing, transportation, purchasing, inventory management, organizing, and planning of other logistic activities.
Some of the key differences between logistic and supply chain management are as follows;
- LM deals with maintaining and combining the storage and flow of goods within the company. SCM is the process of managing and coordinating various supply chain activities of the entire company.
- The goal of LM is to satisfy the needs and wants of customers, whereas the focus of SCM is to gain a competitive edge.
- LM tries to deliver the product as early as possible to the end customers, and SCM tries to implement the modern concepts
- LM deals only with one company, whereas the SCM deals with multiple parties like customers, distributors, intermediaries, and suppliers of different organizations.
- SCM is the latest modern concept, whereas LM is a little element of the big SCM system
- SCM comprises activities like effective planning, storage, implementation, and storing goods from origin to the consumption point in order to meet the demands of customers. The goal of LM is to deliver the right product to the right customer at the right time and in the right place.
- LM deals with activities like stock management, stock control, order fulfillment, packaging, and warehousing. SCM comprises various interconnected activities relevant to the movement of raw material and finished products to the end customers.
- SCM is a broad term that outlines the connection between the supplier and the end customer, whereas LM only deals with the storage and maintenance of goods.
- LM is a very old term compared to the SCM that is relatively a new and modern term. Both LM and SCM complement each other in terms of the distribution of products and services.
Conclusion: What is Logistics and Supply Chain Management? Key Differences
After an in-depth of what is logistic and supply chain management; and some key differences; we’ve realized that SCM and LM are closely relevant and complement each other. If you want to learn the differentiating among them, then study the abovementioned differences.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.