The Evolution of Supply Chain Management
First, let’s look back in time and understand the evolution of supply chain management and how it became a sector of the modern-day enterprise. According to the consultant Cerasis, roots in logistics can be traced in both engineering and operations research. In the 1940’s during World War II, scientists used analytics to study military logistics. In the post-war, logistics was more about understanding the mechanization of pallets and loading cargo, as it became slightly more modular and has gravitated away from breakbulk. Then trucking became more prominent and important in the 1960s, as did the interaction of truckload shipments - and not just rail and ocean shipments – began to collaborate with warehousing, material handling and combine with other freight. The 1980s hatched the age of computerization and the use of data for logistics planning, inventory and truck routing.
During the 1980s and into the 1990s is when the term “supply chain” and “logistics” gained popularity, and this popularity has grown steadily since. As manufacturing has become more global, the scientific approach to turning supply chain monitoring and logistics management into a category of management and a refined discipline, came alive. Author Gwynne Richards, author of the UK business publisher's Warehouse Management and The Logistics and Supply Chain Toolkit, wrote that the Council of Supply Chain Management Professionals (CSCMP) provides a concise description of supply chain management. Their definition characterizes logistics management as a subset of supply chain management 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 customers' requirements."
Logistics vs. Supply Chain Management
So, is there a difference between logistics and supply chain management? It’s hard to find a clear and concise difference between the two terms. It seems to come down to the context in which each is used. It also depends on who you ask.
For example, UPS defines supply chain management as the planning and management of activities that are involved in the production and distribution of products and services which cover from sourcing and product development, to post-sale service that enhance customer value. Others have definitions that may be wider and encompass their global movement, refer to the different modes of transport, and distinguish logistics from supply chain management by describing what each is more concerned about.
Supply Chain Management: The New Kid on the Block
How we approach logistics and supply chain management, however it is defined, is arguably about the same as it’s always been. The old game in town, logistics and its underlying principles, have been in place for decades and the basics are the same. Consider a 1977 article in the Harvard Business Review that cited several cases how logistical considerations in the likes of inventory management and transportation played strategic roles in the success of businesses.
The Harvard Business Review article by James Heskett, who at the time was a Baker Foundation Professor, Emeritus, at Harvard Business School, states: "Logistical considerations have always played a strategic role in business. Among retailers and wholesalers, they transcend inventory management and transportation to include one of the most critical factors in its business success – location in relation to markets or sources of supply." In summary, what’s changed most it seems, is how we approach the topics and the importance we place on them now versus then. Logistics and supply chain may be different, but they’re more important than ever. They are building their supply chain at the forefront of their strategy. Logistics and supply chain, or whatever you call it, is no longer a “back office” function, a track not associated with career success, a corner of the organization that performed a function rather than a solution. But nowadays, watch out when you mention supply chain, logistics, or both. It’s the bread and butter of corporate strategy and success in a go-go economy shaped by global competition and a whole new paradigm of delivering goods.
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 of Associated Transport Systems, Inc.
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.
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.
- 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.
- Logistics refers to the movement, storage, and flow of goods, services and information inside and outside the organization.
- The main focus of supply chain is a competitive advantage, while the main focus of logistics is meeting customer requirements.
- 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.
- Logistics is an activity within the supply chain.
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