More often than not, the freight world deals with two standard terms—Supply Chain Management (SCM) and Logistics Management (LM). These are used interchangeably, and the difference is not made very apparent.
Logistics management is a small portion of SCM that combines the flow of goods, services, information, and capital right from raw material to its final consumer. Whereas supply chain management is much broader and starts right from the product’s source to delivering it to the consumers. Each of these has different functions and processes and are different in many aspects. Before we start picking out the differences, let’s get a brief overview of both these processes.
What is Supply Chain Management?
According to Supply Chain Logistics Management, a book by professors of Michigan State University, Supply Chain Management or SCM involves collaboration between firms to connect suppliers, customers, and other partners to boost efficiency and produce value for the end consumer.
In a broader sense, SCM is a three-part process. It starts from sourcing the raw materials for the product, goes through manufacturing processes, and finally gets dispatched to the end-buyer. The process is complicated due to a lot of factors and needs intense planning and strategies.
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Businesses and companies go out of their way to optimize their supply chain management to incur fewer losses and enhance the business’s productivity. Supply Chain Managers are the personnel who take care of your supply chain and devise various strategies to optimize each part of this process.
What is Logistics Management?
Logistics management is a subset of the more extensive supply chain management process. According to the Council of Supply Chain Management Professionals (CSCMP), Logistics management or LM is a 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 to meet customer’s requirements.
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Logistics Management comprises inbound logistics and outbound logistics. Inbound logistics involves internal operations like warehouse management, inventory management, etc. Outbound logistics management consists of the transport of goods through ocean freight, air freight, etc. and product delivery to the consumer/buyer. For an optimized logistics management process, both these processes must work in compliance with each other.
5 key differences between Supply Chain Management and Logistics Management
Let’s look at some of the fundamental differences between Supply Chain Management and Logistics Management:
- The fundamental difference as made clear from the definitions above is that the SCM involves the planning, implementing, and efficiently storing goods and services between the point of origin and point of consumption to meet customer requirements. Whereas Logistics Management’s main objective is to deliver the right product at the right time with all other attributes in place.
- Logistics Management is targeted towards the satisfaction and happiness of the end-buyer, while SCM emphasizes competitive advantage.
- As highlighted before, Logistics Management is a small part of Supply Chain Management, whereas Supply Chain Management is a new and modern concept.
- Based on the processes involved, Logistics management deals with Inbound and Outbound Transportation, Warehousing, Reverse Logistics (Returns), and Protective Packaging. In contrast, SCM’s processes include Procurement, Supply Planning, Demand Planning, Enterprise Resource Planning, Inventory Management, Manufacturing, Logistics, and Optimization.
- Another key difference between LM and SCM is in terms of the software they use to optimise the process. LM includes traditional TMS (Transport Management Systems), WMS (Warehouse Management System), and software to track Inventory. SCM, on the other hand, involves a range of IoT solutions and software like ERP (Enterprise Resource Planning), Radio Frequency Identification for tracking, CRM software, and Big Data Analytics among others.
These seven points are some of the crucial differences between SCM and LM. In recent years, both Supply Chain Management and Logistics Managements have grown leaps and bounds. A symbiotic relationship exists between the two, as they complement each other for the effective and efficient distribution of goods and services.
IIM Udaipur’s blog on What is the difference between Logistics and Supply Chain Management
Michigan State University’s article on Is Logistics the Same as Supply Chain Management?
CAF Worldwide’s blog on What’s the Difference Between Logistics and Supply Chain Management?