Shippers often confuse the terms “logistics management” and “supply chain management”. Each word is used to describe very similar functions and operations in the transportation industry. However, there is a difference between these terms.
What is the difference between logistics management and supply chain management (SCM)?
Most professionals in the US determine logistics as a subcategory of supply chain management. However, in Europe, Logistics Management (LM) is considered to be a more widespread concept than Supply Chain Management (SCM). The US model is described in our previous post.
Logistics ManagementSupply Chain ManagementDefinitionLogistics management refers to managing the flow of goods, information, and resources from the beginning point of external origin to the point of consumption and reverse. Also, logistics has a vital effect on shipped goods and includes all activities involved in the shipping process. Logistics manages the flow within a company and between a company and its suppliers and customers.Supply chain management is control over integrated network processes, providing the end customer with a product or service and meeting all his/her requirements. It includes numerous aspects of logistics management and demand planning which coordinates processes within and among companies.Processes
- Material handling
- Storage of Goods
- Coordination among carriers
- Fleet management
- Control Procedures
- Logistics flows
- Customer Order Management
- Cost Allocation and Control
- Third-Party Collaboration
- Management of Supply and Demand
- Negotiating Pricing
- Inventory Control
The confluence of two concepts:
Strategy and coordination of product flow are basic concerns of LM. They intersect with many aspects of supply chain management, like distribution and inventory control. Eventually, logistics can be seen as a big puzzle piece, fitting only where it’s meant in the bigger SCM picture. Depending on the company’s size and specialization, logistics management and supply chain management might be bumped into one management mechanism that involves all functions.
Key differences between logistics management and supply chain management (SCM):
Logistics management mostly involves transportation functions, focusing on short term goals. LM concentrates on getting freight from point A to point B – on time and in the most cost-efficient way possible. Also, it includes creating partnerships with trucking companies.
Supply chain management controls a broader number of functions and concentrates on achieving customer satisfaction and maximizing profit in a long-term way. Also, SCM covers the management of supply and demand, control over cost allocation and all collaborations with 3PLs.
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