Supply chain management includes many different elements. One of them is logistics. Despite this, there’s often a lot of confusion when talking about the two and even wrongly considering them as one and the same. They are not. In this article, we’ll get into the difference between supply chain management vs logistics and why it’s important not to think of them as the same thing. One reason is certainly not embarrassing yourself in a conversation.
SCM and logistics have many similarities, but they have different meanings. The biggest difference is in what each one represents. Logistics covers the flow of goods and their storage within the SCM On the other hand, supply chain management itself is a much wider concept and consists of several processes, of which logistics is but one.
To understand the difference between supply chain management vs logistics, we need to understand them better individually.
What is SCM?
Supply chain management includes connecting customers, suppliers and partners and that way offering value for the end user and improving efficiency within your own company.
Think of supply chain management as being the central thing that connects the manufacturer of the product, the wholesaler, supplier, retailer and finally the customer and making life easier for them all. As you can guess, that includes a number of functions and people in order to work well (like a well-oiled machine), logistics is just one of those functions.
What is Logistics?
Logistics, according to the Council of Supply Chain Management Professionals is a “part of the supply chain process that plans, implements and controls the efficient, effective forward and reverse 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.”
The goal of logistics is that the customer gets the product they ordered at the right price, the right quality and at the right place and time. To achieve this, logistics itself includes warehousing, packaging, transportation and more.
Logistics itself can be divided into two sub-categories:
- Inbound logistics includes activities and processes such as acquiring, handling, storing and transporting goods.
- Outbound logistics deals with collecting, maintenance and finally getting the product to the end customer.
Supply Chain Management vs Logistics: Key Differences
SCM and logistics need each other, but don’t fall into the trap of using the terms interchangeably. Here are the key differences you need to keep in mind:
- Logistics is one of many activities in the supply chain
- SCM connect the supplier, wholesaler, retailer, manufacturer and customer, improving business efficiency and getting the product to the customer.
- Logistics involves the flow and storage of goods within and outside the business
- The end goal of SCM is competitive advantage
- Logistics is focused on meeting the customer’s requirements.
There you have it! Hopefully this helped you better understand the difference between supply chain management and logistics and getting more efficient with them. If you have any thoughts or questions, we’d like to hear them in the comments below. Also, don’t forget to sign your email to get a free trial for our Purchase Order Plus. Purchase Order Plus is a mobile app for Xero that allows you to get better control of tour POs.