Monday, September 18, 2023
Logistics and Supply Chain: do you know the differences between them?
Global supply chains are essential for organizing and enabling world trade. On the other hand, logisticsinvolved in sending, receiving, moving and storing merchandise is also fundamental for successful deliveries.
It’s no wonder that the terms supply chain and logistics are used interchangeably by many professionals and organizations. However, it’s important to keep in mind that they’re not synonyms. It’s a fact that both strategies aim to deliver a product to the end user.
Nevertheless, there are several important differences between the functions, capabilities, inputs and outputs of each concept. They’re uniquely designed and executed. Supply Chain Management is much more complete, involving a series of other factors and activities.
In this article, you can check the main differences between the two terms, in addition to understanding how they complement each other.
What’s logistics?
From the French word “logistique”, science that deals with the planning and execution of different projects, logistics consists of the process of moving, storing, transporting and handling merchandise.
In practice, all the stages of logistics, from product manufacturing to delivery at the final destination, are carried out to meet consumer expectations.
Logistics is mechanical in nature, focusing on finding the route with less resistance to enable delivery to the customer.
In short, logistics works to ensure that the processes are well defined, guaranteeing that the end customer actually receives the product they ordered.
What’s Supply Chain?
Supply Chain Management is an approach to managing merchandise and services that is oriented towards the entire process: usually, from the extraction of raw materials to the consumption of the final products.
In this case, the objective is not to optimize the warehouse, but the logistical processes related to a product or a portfolio.
Supply Chain encompasses all the processes that involve the life cycle of a product: the production, from raw materials, to delivery to the end consumer.
It’s important to note that Supply Chain is made up of several members who act in different stages: suppliers, manufacturers, distributors, warehouses, retailers and consumers.
Therefore, it’s possible to state that Supply Chain Management was developed from the concept of Integrated Logistics. The main goal is to ensure the best integration between all Supply Chain processes.
Supply Chain and Logistics: what’s the difference?
As we’ve seen so far, Supply Chain is an overarching concept that links manufacturing, purchasing and distribution in the same process.
Supply Chain is a structure that connects manufacturers, suppliers, retailers and customers to ensure efficiency, quality and competitive advantage. Logistics is a part of this operating structure.
The main difference between the two concepts is that while logistics is concerned with some supply chain processes, Supply Chain takes a holistic and contextual approach.
The challenges are different. Take a look:
- Logistics is guided by the question: “The customer wants [the product]. How are we going to reach them?
- Supply Chain Management, on the other hand, asks: “How can we improve our supply chain processes to provide more value to our customers and outperform the competition?”
- In Other words, we can say that:
- Logistics focuses its efforts on physically moving its products from point A to point B. In addition, this science also seeks to acquire the product or raw material from the indicated source, within the established deadline, in the adequate quantity, in the ideal place and for the right customer with a fair price. This work is done in an intracompany integration approach, that is, within the company.
- Supply Chain seeks to improve every aspect of manufacturing, storing, delivery and service, maximizing the productivity of your business. It’s an intercompany management approach, that is, it involves negotiation between companies.
Integrated logistics combines both concepts
Integrated logistics proposes to combine both concepts. It’s about extracting the best of logistics and Supply Chain, seeking maximum integration between a company’s processes.
Take a look at the contribution of the concepts to integrated logistics:
Supply Chain Management: involves suppliers, customers and partners in a coordinated effort to rationalize and optimize the flow of materials and information. From raw material to the consumption of the final product, supply chain controls each step with the aim of:
- Eliminating redundancies;
- Reducing the time of production and inventory cycles;
- Offering valuable services at lower costs for customers.
Logistics: focuses on controlling the movement of products from one point to another and monitoring the flow of information about this transportation. The goal is to combine inventory control with cost reduction.
In the integrated logistics strategy, Supply Chain keeps its focus in the strategic and integral vision of the logistical processes. In turn, logistics manages the acquisition of supplies, storage and transportation of products from origin to destination.
Thus, by combining logistics and Supply Chain in a single strategy, companies can improve a series of processes, such as:
- Planning;
- Inventory management;
- Order processing;
- Handling and storage;
- Management of information, transportation and distribution;
- Planning, Programming and Production Control (PPCP).
