What Are Supply Chain Logistics?

Supply chain logistics coordinate the storage and shipping of goods and
services across the supply chain. The practice begins with raw materials,
continues on to manufacturing and/or distribution and ends when a
business delivers finished goods to the customer or when products are
returned to their final destination.

Key Takeaways

 While many use supply chain management and logistics interchangeably,

they cover different (but related) activities.
 A supply chain covers the production and delivery of goods and services to
all types of customers.
 When well executed, both supply chain management and logistics can give
companies a competitive advantage and bring value to customers.
Are Logistics and Supply Chain Management the Same Thing?
Logistics focuses on the movement and storage of items in the supply
chain. Supply chain management (SCM) is more comprehensive, covering
all of the coordination between partners that have a role in this network,
including sourcing, manufacturing, transporting, storing and selling. The
ultimate goal of SCM is to find processes that ensure a smooth, efficient
flow of goods that give customers an excellent experience and drive the
business forward.

While supply chain management handles activities between separate

entities, logistics focuses on the internal movement of goods. Additionally,
SCM supports all purchasing, production and distribution of goods.
Logistics, meanwhile, moves and stores goods between different points in
the supply chain. To learn more, read our article on inbound and outbound
logistics.

Supply Chain Management vs. Logistics

SCM includes the high-level processes involved in sourcing and buying raw
materials and eventually creating finished goods. SCM uses logistics to
deliver goods to the consumer, but it ultimately strives to boost the bottom
line and increase a business’s competitive edge.

In other words, SCM sets the strategy and directs daily logistical activities
that happen in factories, warehouses, local shipping centers and other
facilities. Logistics is an aspect of the supply chain that stores or delivers
finished goods or services to the customer, whether that’s a manufacturer,
distributor or consumer. The goal of logistics is to get goods and services to
the customer on time and at a competitive price. Learn more in
our introductory logistics guide.

What Is Supply Chain Management?

Supply chain management refers to the activities that create finished goods
from raw materials and deliver them to the customer. SCM also focuses
on improving supply chain processes, which can benefit both customers
and business partners.

A company can only optimize and continuously refine SCM when it

has visibility across its supply chain. This visibility enables companies to
track goods and services as they move through each stage of the supply
chain, which makes it much easier to see if everything is running as
planned. It also gives decision-makers more time to respond to disruptions
or other roadblocks.

SCM involves overseeing an often-vast network of sub-suppliers (like raw

materials providers), suppliers, manufacturers, logistics partners, wholesale
distributors, retailers and end users. The relationships between these
various stakeholders in the supply chain vary. They can be vertical, such as
between parts and materials suppliers, manufacturers and retailers, or
horizontal, where a company merges with or acquires a similar business
that operates at the same stage of the supply chain.

To illustrate how supply chain management works, let’s use a home

cleaning products manufacturer as an example. As part of the SCM
function, the company sources the chemicals and containers it needs from
suppliers, makes the end product and then distributes the finished goods to
convenience stores, drug stores and supermarkets. Supply chain
 management touches on every process involved in the movement of those
products.

What Are Logistics?

Logistics includes planning and executing the storage and movement of
goods between different points in the supply chain. Logistics coordinates
facilities, people, equipment and other resources to ensure products move
when they’re supposed to and there is space for them at the next stop.

Demand planning, transportation (including fleet management), inventory

management, material handling and order fulfillment are all processes that
fall under logistics. To learn more, read our article on logistics
management.

How Are Supply Chain Management and

Logistics the Same?
Both supply chain management and logistics focus on the flow of goods
from the point of origin to the endpoint. Both disciplines require careful
coordination of supplies, labor and facilities to make sure items can move
through the supply chain as required. Logistics is a key component of
supply chain management, but just one piece of the equation.

Similarities of Supply Chain Management and Logistics

Supply chain management and logistics both work to move, store and
deliver goods as efficiently as possible. Supply chain management
provides the strategic direction that guides inbound and outbound logistics.

Some common aspects of SCM and logistics are:

 Both focus on goods, services or information.

 Both have the ultimate aim of supporting the company’s success and
distinguishing it from competitors.
 Both seek to increase customer satisfaction.
 Both revolve around the same flow of goods and services, from the
supplier, to the manufacturer, to the wholesaler and finally to the retailer or
consumer.
 How Are Supply Chain Management and
Logistics Different?
Supply chain management outlines the strategy and activities that go
into planning, sourcing, producing and delivering goods, as well as
handling returns. Logistics focuses on the right products being in the right
place at the right time, and how to get them there.

Key Differences Between Supply Chain Management and

Logistics
As should be clear at this point, supply chain management and logistics
definitely intersect, but they differ when it comes to their scope and focus.

Key differences between SCM and logistics include:

 Logistics are activities in supply chain management. SCM covers a variety

of activities, including production and inventory planning, labor planning,
materials and facilities management, manufacturing and delivering goods
and services.
 SCM works toward improving processes to create competitive advantages,
while logistics emphasizes meeting customer needs and expectations.
 Logistics focus on the efficient and cost-effective delivery of goods to the
customer.
 Supply chain management controls the development of raw materials into
finished goods that move from the supplier to producer to warehouse to
retailers and/or consumers.
 The term logistics originated with the military. Many historians credit
Alexander the Great, born 356 B.C., as a logistics master.
 The modern practice of supply chain management started in the 20th
century. Many experts credit the logistician Keith Oliver as the person who
coined the term supply chain management in the early 1980s.

The Differences Between Supply Chain Management and

Logistics

Logistics Supply Chain

Logistics is one activity in Supply chain management covers a wide range of

supply chain management. activities, including planning, sourcing materials,
 Logistics Supply Chain

labor and facilities management, producing and

delivering those goods and services.

Logistics focuses on the Supply chain management targets higher operational

efficient and cost-effective performance that will give the business a competitive
delivery of goods to the advantage.
customer.

Logistics started with the
military. Many say
Alexander the Great, born
356 B.C., as a logistics
master.
The modern practice of supply chain management
started in the 20th century. The Ford Motor
Company production lines perfected the concept.
Many credit logistician Keith Oliver as the person
who coined the term in the early 1980s.

Logistics are centered on the SCM oversees the development of raw materials into
movement and transport of finished goods that move from the producer to the
goods within a company manufacturer. Those goods get distributed to retailers
or directly to consumers.

Role of Logistics in Supply Chain

Management
In supply chain management, logistics are responsible for the movement
and storage of goods and services, along with the documents and reports
that record those movements throughout an item’s journey to the customer.

Logistics include the numerous transportation methods that get inventory

from one location to another. This component is responsible for figuring out
where goods can be kept at each stage until they’re needed at another
location, which is essential to effective supply chain management.

Why Logistics Are So Important to Supply Chains

Logistics are a critical piece of supply chains because it manages and
tracks the people and resources needed to store and transfer goods and
services. Logistics ensure that materials and products reliably move at the
right time and on budget.
 Specific aspects of logistics that support supply chains include:

 Delivering the right products at the right time.

 Reducing costs and improving efficiency.
 Helping retain customers and increasing loyalty.
 Providing a unique value proposition for some businesses.
 Providing a means to deliver goods from the most cost-effective location for
production to the location of the customer.
Why Is Logistics Training So Important to Supply Chains?
The field of logistics is constantly evolving as customer trends change.
Logistics training helps employees and their companies stay current with
best practices. Training gives a company the tools it needs to analyze and
improve customer demand, product design and distribution strategies.

Why Use Logistics and Supply Chain

Management?
Logistics and supply chain management help businesses stay competitive.
These practices track and coordinate the efficient and cost-effective
movement of goods and services, which is key to an organization’s
profitability.

Logistical Components of the Supply

Chain
Supply chain logistical components help to manage goods or services.
Each element helps move materials, finished goods and services through
the many steps in the supply chain.

The following are the logistical components of supply chains:

 Information:
 Information helps track the status of items and all supply chain processes,
informing business decisions at each step.

 Storage:
Storage is the practice of holding supplies in the right quantity and right
location. Businesses must strike a balance between demand and supply to
prevent overstock and out-of-stock situations.

 Warehousing:
This component controls the day-to-day warehouse operations, such as
receiving, put-away, picking, packing, shipping and receiving.

 Material handling:
Material handling can refer to the limited movement of items within a
building or a delivery vehicle. Others extend the definition to include the
storage, security and transfer of goods throughout the manufacturing,
distribution and delivery processes.

 Packaging:
Proper packaging ensures items arrive undamaged and ship for the lowest
possible cost.

 Unitization:
Unitization makes items efficient to arrange, transport and store. Unitization
methods also ensure that material handling equipment can move items
efficiently and without damaging them. The cube is one of the easiest units
to store and shift, so it’s a popular type of unitization.

 Inventory control:
Inventory control incorporates storage and warehousing techniques to
optimize the types and amount of stock held and where. Companies can
use inventory management formulas to better calculate demand.

 Transportation:
This component is responsible for moving goods along the supply chain to
the next node or directly to the customer. Transportation modes include
cars, trains, trucks, planes and ships.

The Role of Logistics within Supply Chain Management

 Supply Chain Logistics

Planning “Information Inventory control”

Sourcing “Information Material handling Transportation”

Manufacturin “Information Material handling Storage Warehousing Packaging/Unitization

g Transportation”

Delivering “Information Warehousing Inventory management Materials-handling Packaging

Transportation”

Returning “Information Packaging/Unitization Material handling Transportation

Warehousing”

How Both Supply Chain Management and

Logistics Are Fundamental to Success
Supply chain management and logistics both support customer needs and
improve the buying experience. Logistics provides direct feedback on
customer demand. SCM uses this data to understand what consumers
want and plan production and inventory levels.

Reliable, cost-effective logistics pave the way to efficient supply chain

management. A well-managed supply chain results in filling orders
accurately and on time, which over time will attract new clients and grow
the bottom line.

Many businesses have realized the benefits of using supply chain

management software to help mitigate the complexities and challenges of
supply chains. This software can unify various aspects of the supply chain,
from sourcing to production planning to inventory and order management,
to help organizations meet rising customer expectations while keeping
costs stable. It can also provide in-depth reporting on various aspects of
your operations to highlight opportunities for process improvements or call
attention to potential problems.
One company transformed its business after adapting supply chain
management software. Initially a candy company, Green Rabbit built a
heat-sensitive supply chain to help preserve its products during shipment.
Other companies took notice, began to pay for the service, and Green
Rabbit became a leading cold-chain logistics provider for perishable goods.
Green Rabbit implemented NetSuite to manage its growing business,
which includes three warehouses and an expanding list of customers. The
solution automated many processes and it can now ship orders to all
customers in one day.