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September 5, 2019

What is the Difference Between Logistics and Supply Chain Management?

Written by SmartSense | Supply Chain

The thin line that separates logistics and supply chain management might be a little hazy, and most often these concepts are intertwined. Logistics, supply chain, transportation - are all descriptors, among many, of a new sector of global and emerging commerce that has moved to the forefront of global business in today’s worldwide economy. But what exactly is the difference between “logistics” and “supply chain management?”


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."


supply chain management concepts

Concepts that are covered by supply chain management. Source: https://www.michiganstateuniversityonline.com/resources/supply-chain/is-logistics-the-same-as-supply-chain-management/


Richards contrasts supply chain management with its distant cousin – operations research: the former is focused on the movement of goods, whereas the latter is focused on the production of goods. Thus, the production of goods (which has been studied over and over for many years) gave way to the principles and discipline of the movement of goods once produced.


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.


Watch our live demo to get a firsthand look at how we enable end-to-end  visibility into the supply chain, and see real data gathered by our customers.


Michigan State, in their online blog, did a pretty good job of examining the two genres. As explained by their professors, supply chain logistics management involves collaboration between firms to connect suppliers, customers, and other partners as a means of boosting efficiency and producing value for the end consumer. While logistics is defined as activities – transportation, warehousing, packaging and more – that move and position inventory and acknowledge its role in terms of synchronizing the supply chain.


But their opening description is most apt: "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.” This may be one of the better ways of thinking of the two disciplines. They’re similar, but seem to be changing by the day, month, and year. Logistics is an older brother of supply chain management. Supply chain is the new game in town.


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."


The Logistics Process

The Logistics Process. Source: https://hbr.org/1977/11/logistics-essential-to-strategy


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.


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