Is Logistics the Same as Supply Chain Management?

The terms logistics and supply chain management are sometimes used interchangeably. Some say there is no difference between the two terms, that supply chain management is the “new” logistics. To compound this, what is considered supply chain management in the United States is more commonly known as logistics management in Europe, according to the blog for PLS Logistics Services, a logistics management firm in Pennsylvania. When the question was posed in an Inbound Logistics article, the answers varied based on the functions of a supply chain (or logistics) professional handled. Some thoughts from their readers: “There isn’t a difference today,” said Wayne Johnson of American Gypsum.

“Supply chain management incorporates the field of logistics and logistics is a number of sub-processes within SCM,” said Michael Kirby of National Distribution Centers.

“A ‘supply chain management’ company is generally a third-party operator managing the total overall movement of product whether inbound or outbound,” said William Behrens. Purchasing, materials handling, logistics, transportation, inventory control, and supply chain management have continued to evolve, causing many of these functional areas to intersect with one another. This intersection has resulted in blurred definitions for some of these terms such as logistics and supply chain management. While these two terms do have some similarities they are, in fact, different concepts with different meanings. Supply chain management is an overarching concept that links together multiple processes to achieve competitive advantage, while logistics refers to the movement, storage, and flow of goods, services and information within the overall supply chain.

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.

Key Differences

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.

1. 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.
2. Logistics refers to the movement, storage, and flow of goods, services and information inside and outside the organization.
3. The main focus of supply chain is a competitive advantage, while the main focus of logistics is meeting customer requirements.
4. 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.
5. Logistics is an activity within the supply chain.

Logistics is a Subsection of the Supply Chain

The Council of Supply Chain Management Professionals states that logistics is, “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.”

Logistics is a Part of the End-to-End Supply Chain Process

The most important distinction is that logistics is a distinct part of the supply chain and is essential to good supply chain performance. A supply chain may have many different types of logistics and logistics companies within it, all dedicated to helping the supply chain run smoothly. However, each logistics operation is only responsible for a unique and self-contained part of the supply chain.

Logistics Moves Goods from Place to Place

Good logistics management is all about efficient transport and storage. Logistics providers use a variety of land, air, and ocean assets to move goods quickly and efficiently. They take advantage of containerization for moving goods between types of transportation, known as “intermodal” transport.

Logistics Stores Goods Until They Are Needed Elsewhere

Once goods have reached their destination, logistics providers will store them in warehouses or other facilities. They will keep goods until they are needed further down the supply chain, whether that’s another supply chain organization or for delivery to an end customer.

Logistics Distributes Products to the End Customer

Some logistics businesses specialize in distribution—delivering goods to the final customer, typically known as “Last Mile Delivery.”

Logistics Plans, Implements, and Controls

Because logistics providers are responsible for their part of the supply chain, they will:

• Plan how to move goods from one place to another, store those goods, and produce the right information and documents for efficient reporting and processing
• Implement the movement and storage of goods using multiple types of transport and arranging for short- or long-term storage
• Control how goods move, through fleet management, shipment tracking, technology, sharing information and working with partner organizations in the supply chain
• Drive up value for supply chain partners

Types of Logistics Organizations

Essentially, if goods are being transported or stored, that’s a logistics process. There are many types of logistics businesses, including:

1. In-house logistics: Some wholesalers, retailers and other large organizations may have their own in-house logistics function
2. Logistics Service Providers (LSPs): Companies that provide management over the flow of goods and materials between points of origin to end-use destination. The provider will often handle shipping, inventory, warehousing, packaging and security functions for shipments.
3. Third-party logistics (3PL): These are specialist logistics providers who offer a suite of services to a range of clients, for example freight by air, rail or road, or specialized transport and storage facilities, like cold storage
4. Reverse logistics: These organizations specialize in returning products to manufacturers, for example if they are defective or the customer did not want the item
5. Warehouse providers: Some logistics businesses only store goods and don’t get involved in transportation
6. Courier shipping: These logistics providers deliver products to end customers and specialize in last mile deliveries.

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