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The Differences Between the Supply Chain and Logistics
Global supply chains are essential to worldwide commerce, and the underlying logistics involved in sending, receiving, moving, and storing goods is central to that success. It’s no surprise that the terms “supply chain” and “logistics” have become conflated and are often confused with each other. Despite some individuals and organizations using the words interchangeably, there are many important differences between the functions, capabilities, inputs, and outputs of each.
The quickest distinction to make is that supply chains are responsible for the overall sourcing, processing, and delivery of goods to the end customer, while logistics specifically focuses on moving and storing goods between different supply chain organizations.
We’ll break everything down and explain the key differences between logistics and 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.”
That’s a bit of a mouthful, so let’s break it down.
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 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
Logistics Moves Goods from Place to another 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 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 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.
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:
In-house logistics: Some wholesalers, retailers and other large organizations may have their own in-house logistics function
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.
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
Reverse logistics: These organizations specialize in returning products to manufacturers, for example if they are defective or the customer did not want the item
Warehouse providers: Some logistics businesses only store goods and don’t get involved in transportation
Courier shipping: These logistics providers deliver products to end customers and specialize in last mile deliveries
In short, logistics is a limited, distinct part of a larger, collaborative supply chain network.
Supply Chains are the Overarching Framework for Sourcing, Manufacturing and Supplying Products
Now that we understand what logistics is, it’s worth expanding our scope and looking at what the overall supply chain actually represents. The supply chain represents the connections and collaborations between suppliers, manufacturers, logistics businesses, wholesalers, retailers and end customers. The supply chain process starts when an organization gets an order for a product or service, and finishes when that product or service is successfully delivered to the end customer.
Supply chain management is a function that oversees and directs the manufacture, transportation and delivery of goods and services between their origin and their final destination.
Supply Chain Management Works Across Multiple Organizations
The overall supply chain brings together multiple partners to source, manufacture, transport, store, supply and sell goods:
Suppliers: Produce raw materials or parts that can be manufactured into products
Manufacturers: Create parts or products from raw materials and other inputs
Logistics: Transports and stores goods as they move through the supply chain
Wholesalers: Purchases goods for onward distribution to stores or other sales outlets
Retailers: Sells finished products to end customers
Supply Chain Management Can Also be Responsible for Other Areas
Supply chain management often controls other aspects of the order, inventory and supply chain process.
Fosters collaboration and partnerships: Provides links and better ways for different supply chain organizations to work together
Inventory management: Identifying when the stock of particular products is falling and arranging to procure new items
Order management: Raising orders with suppliers, manufacturers and other organizations in the supply chain
Order, asset and shipment tracking: Following the flow of orders, goods and other assets through the global supply chain
Visibility: Reporting on the flow of goods through the supply chain
Troubleshooting: Identifying and resolving issues with the speed, cost, quality or other aspects of goods moving through the supply chain
Ultimately, a strong supply chain provides a competitive advantage to every organization that’s involved. While the overall supply chain is responsible for marketplace success and revenues, logistics plays a critical, central role in ensuring raw materials, parts and finished products flow smoothly through the global supply chain.
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