Often used interchangeably, logistics management and supply chain management (SCM) are two different concepts. While the functions are similar and even overlap, it is essential to know the difference between logistics and supply chain management to run operations successfully.
Logistic functions lie within supply chain functions, so it is easy to understand the confusion between the concepts. To complicate matters further, the terms have opposite meanings in European countries, with logistics management defined as what the U.S. refers to as supply chain management and vice-versa.
Supply chain management is every function from planning, sourcing, making, delivering, and returning goods and services. Logistics management is the control and supervision of the movement of goods. Therefore, logistics management falls under supply chain management’s delivering and returning functions. Logistics management deals solely with the flow and storage of products, whereas supply chain management includes every process in production, from raw materials to the final product.
Logistics management is defined as the “part of supply chain management 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 to meet customers’ requirements.” You can divide logistics management into two functions:
First, understand your business’s key performance indicators (KPIs) to build a logistics management strategy. KPIs are specific, obtainable metrics that measure business performance in critical areas. Examples of smart logistics KPIs include:
Once you understand your KPIs, it is much easier to understand which areas of your logistics operations are doing well and which are lacking. Next, build a strategy that best suits your logistical needs, such as outsourcing operations your business struggles handling or switching transportation services for a more reliable carrier.
Supply chain management includes all logistics management operations and manufacturing processes to coordinate all marketing, sales, product design, finance, and IT activities. Stakeholders increasingly understand the importance of having fluid coordination amongst all business areas; therefore, the supply chain management market is booming. The global SCM market size was valued at 10.1 billion in 2020 and is to grow to 19.3 billion by 2028, a compounded annual growth rate of 9%.
Supply chain management controls the planning, sourcing, and making of products, unlike logistics management which only oversees the delivery and return of goods. Since a supply chain management team must supervise all business areas, collaboration and communication are particularly important.
Do not be overwhelmed by all the functions of a supply chain when creating a supply chain strategy. Remember your KPIs and the five main functions of a supply chain and work from there. The following are examples of supply chain strategies to help streamline your business:
Strategy and coordination of product flow are primary concerns of logistics management. However, as you can imagine, logistics management intersects with many aspects of supply chain management, such as inbound deliveries and outbound distribution. Logistics can be seen as a puzzle piece, only fitting where it belongs in the bigger SCM picture. Depending on the company’s size and specialization, logistics and supply chain management may be a singular management mechanism that involves all functions.
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