Logistics vs Supply Chain: What’s the Difference?
Ever had an experience ordering something online and then wondered how it arrived at your doorstep so quickly? Or maybe have you ever thought about how your favourite chocolate bar travelled thousands of miles and yet tasted like it was just made yesterday? There is a finely tuned system in place behind ordinary deliveries — the supply chain vs logistics.
When you come across terms such as ‘logistics’ and ‘supply chain management’, you might assume these are just two business terms or meaningless jargon thrown around in the office or casually tossed about when reading a business article online. Well, these terms are meaningful in every industry. The supply chain describes the high-level movement of goods, services, and information; logistics is a segment of the supply chain that deals with the movement of goods and services and their storage. Even though these terms are used interchangeably, they serve very different functions and are equally important to the ongoing operation of a business and the satisfaction of customers.
So, whether you are an aspiring entrepreneur, a business student, or just generally curious about how an item moves from a factory to your hands, understanding the difference between logistics and supply chain management is vital. In this blog, we will explore these two topics with their benefits and how they are different from each other. Let’s get started.
Table Of Content
What is Supply Chain Management?
Benefits of Supply Chain Management
What does Logistics mean?
Key Roles of Logistics
Logistics vs Supply Chain Management: Understanding the Difference
How are Logistics and Supply chains interconnected?
Want to Build a Career in Supply Chain Management?
How Does Jaro Education Support You?
Wrapping Up
Frequently Asked Questions
What is Supply Chain Management?
Think of a vast network of interconnected things that starts with planning, organising raw materials and ends with the product being received by the customer. That is the supply chain. Supply chain management (SCM) is the process that involves planning, coordinating, and managing each link in that unique chain.
To put it simply, SCM is about collaboration. Companies connect with suppliers, manufacturers, distributors, and retailers to decide how best to produce a product while ensuring quality control, lead time, and other efficiencies are met and executed. Before understanding the difference between logistics and supply chain management, it is important to know that SCM is a strategic and relative perspective. Supply chain managers must ensure every link is constantly reviewed, and efficient decisions about the sourcing of materials, development of a product, and delivery of the product are made.
Benefits of Supply Chain Management
Understanding the key role of supply chain management in the field of supply chain vs logistics will get you closer to understanding the difference between logistics and supply chain management. Here are some of the top benefits that you should know:
Comprehensive Control and Visibility
SCM allows end-to-end visibility of the entire process, from sourcing materials to delivering finished goods. With advanced software systems, managers can track where products are in real-time, anticipate bottlenecks, and act before small problems become larger issues. The visibility allows for better and more coordinated decision-making, like a conductor coordinating an orchestra.
Network Quality Assurance
One of the greatest advantages of SCM is the ability to maintain quality. Regardless of whether the material comes from local suppliers or international vendors, SCM ensures a common baseline set of quality measures is in place to prevent defective materials from entering the market and tarnishing brand reputation. Understanding this key role of ACM will help you to clear the concept of the actual difference between logistics and supply chain management.
Speed and Efficiency
Today, most people seek quick services. Thus, SCM optimises processes for the production, storage, and delivery of goods regardless of the required emphasis on quality. If a supplier is delayed, SCM can have plans in place to supply from another region to maintain production.
Cost Reduction and Optimisation
A smart supply chain is a game-changer that not only moves products but also saves money at every stage. From more efficient shipping routes to lower storage costs, SCM finds efficiencies at every step. Even small changes like optimizing packaging to reduce freight space can mean money saved. This key role of SCM helps people understand the difference between logistics and supply chain management.
Demand Forecasting and Inventory Planning
SCM also allows a company to predict demand based on past demand and current market conditions. Therefore, a company can stock the right amount of inventory, not too much so that there is waste, but not so little that the company runs out of stock.
Risk Management
Unpredictable factors, like natural disasters, strikes, or sudden shifts in demand, can disrupt supply chains. SCM builds resiliency into supply chains by recognizing probable risks and developing contingency plans, allowing a business to adapt to conditions without incurring significant losses.
What does Logistics mean?
Now we are already one step closer to understanding the actual difference between logistics and supply chain management by getting an overview of SCM. So, let us talk about logistics now?
Logistics can be considered as the mechanics of the plan. While the SCM (supply chain management) is the master plan, logistics is the realisation of the plan. It is the planning and coordination of the transportation and storage of goods, so they are delivered on time, in the right condition, and at the lowest cost possible.
Logistics is the practical element of the plan that includes warehouse management, transportation, packing, inventory, and customer service; delivery schedules are all handled by logistics. Without effective logistics, a well-functioning supply chain will not get to the desired destination!
Key Roles of Logistics
If you want to know the real difference between logistics and supply chain management, understand the benefits of logistics and how it plays a crucial role:
Transportation Management
Logistics help with transportation management by determining how things will be transported (road, rail, sea, air), deciding the route that needs to be planned, and accounting for a safe and efficient delivery.
Inventory Control
It is very important to have the right amount of inventory. Too much inventory can cause money and space problems; too little inventory causes customer service issues because the product is not available.
Material Handling and Inventory
Logistics’ unique function of material handling can range from the use of forklift trucks to the use of automated storage and retrieval systems. Correct safe storage systems ensure that inventory is safe and easily accessible when required.
Order Fulfilment
The goal of logistics is to ensure the customer receives the product ordered, on time, and in perfect condition.
Logistics vs Supply Chain Management: Understanding the Difference
While logistics and supply chain management are closely linked, their roles, scope, and focus are different. Logistics is about the movement, storage, and delivery of goods, while supply chain management is about strategic coordination of the entire process from sourcing materials to final delivery. The table below represents the difference between logistics and supply chain management.
| Parameter | Logistics Management | Supply Chain Management |
|---|---|---|
| Definition | The process of planning, implementing, and controlling the movement and storage of goods and services from origin to consumption. | The strategic management of the entire network, from raw material suppliers to manufacturers, distributors, and end customers. |
| Scope | As mentioned, logistics is just a part of supply chain management, so it is narrower. It mainly focuses mainly on transportation, warehousing, inventory control, and order fulfilment. | The difference between logistics and supply chain management is that supply chain is the main element as it includes logistics plus sourcing, production, demand forecasting, marketing, and customer service. |
| Focus | Answers the “How” such as how products move, where they are stored, and how they are delivered. | Answers the “Why and When” such as Why the process is set up a certain way, when production and deliveries should occur, and how to optimize the entire chain. |
| Activities | The difference between logistics and supply chain management is that it includes inventory management, transportation planning, packaging, material handling, and delivery scheduling. | It covers everything from planning to delivery. Primary functions are: Product development, supplier relationship management, production planning, marketing, and returns management, along with logistics activities. |
| Time Frame | It is for short-term and operational, ensuring daily deliveries are on time. | It is for long-term and strategic, ensuring overall supply chain resilience and efficiency. |
| Integration Level | Primarily internal to the organization and is focused on moving goods within or between facilities. | This is another difference between logistics and supply chain management that it involves multiple organisations, integrating suppliers, manufacturers, and distributors into one coordinated network. |
| Objective | Efficient product delivery, cost reduction in transportation, and improved customer service. | Fulfil customer demand, enhance competitiveness, reduce costs across the chain, and create long-term value. |
| Example Software | Another difference between logistics and supply chain management is that logistics include some of the top software such as Freight Master, Acumatica ERP, ViewPoint Logistics. | SAP, Oracle, JDA, and HighJump are some of the common yet popular software used by many organisations. |
| Example | Coordinating truck routes to deliver goods from a warehouse to retail stores. | Designing the entire supply network, including choosing suppliers, determining manufacturing locations, and setting delivery timelines. |
How are Logistics and Supply chains interconnected?
After understanding the difference between logistics and supply chain management, rather than taking these two terms as competitors, it’s better that we see them as a collaborative duo that works hand-in-hand to maintain efficiency and profitability.
If logistics is needed to effectively carry out the strategy developed in supply chain management, then supply chain management would be much less effective without logistics. But when logistics and supply chain management are connected and ideally integrated, it’s a cohesive system that moves products where they need to be at the appropriate time, at a reasonable cost, and in the best manner possible.
Example: Green Rabbit
Green Rabbit started as a candy manufacturer and retailer, but they were challenged with the process of shipping heat-sensitive products without spoilage. They redesigned their supply chain to meet temperature-controlled logistics. Leveraging cutting-edge supply chain management software, Green Rabbit automated business processes and warehousing while also maintaining their commitment to one-day deliveries. Today, Green Rabbit is a leader in cold-chain logistics, and they are not limited to only serving the candy industry. Green Rabbit provides logistics services to anyone who requires temperature-sensitive deliveries.
Want to Build a Career in Supply Chain Management?
After understanding the difference between logistics and supply chain management, if you think that your skills or interests align with building a thriving career in this field, you’re at the right place. Get an in-depth understanding of logistics and supply chain management by registering for the Bachelor of Business Administration (BBA) provided by Chandigarh University through Jaro Education. This industry-oriented program brings dual specialisation to the participants.
How Does Jaro Education Support You?
If you’re registering in a programme through Jaro Education, we provide support with:
- Dedicated academic guidance
- Career counselling
- Network building opportunities with alumni and industry professionals
- Doubt resolution sessions
- For most of the IIM and IITs courses, we also offer resume building, and
Wrapping Up
Indeed, after going through the real concept of the difference between logistics and supply chain management, you must have understood that these two are critical aspects of modern commerce. In summary, Logistics concerns the actual transportation and storage of goods; whereas supply chain management takes a broader strategic view of the entire process, from the arrival of materials to the final delivery to customers.
The difference between logistics and supply chain management is not merely academic; it is important for anyone engaged in the daily operations of a business. Overall, it should not be a question of choosing one vs. the other; instead, both logistics and supply chain need to work together as a cohesive function that is effective and efficient with a goal of maximizing profit and customer satisfaction.
Frequently Asked Questions
Yes, when going through the logistics vs supply chain management, it is wise to see logistics as the aspect of supply chain management that deals with the transportation, storage, and delivery of goods.
If you want to understand the difference between logistics and supply chain management, know that supply chain management is broader because it encompasses the whole process from sourcing raw materials to delivering products; logistics is concerned primarily with movement and storage.
The concept of logistics vs supply chain management can give a little bit of an overview that a business can operate temporarily with just logistics, but the long-term effectiveness and growth potential, as well as maximizing customer satisfaction, all become very difficult without supply chain management.
Technology, via ERP systems, AI-driven forecasting, and capable real-time tracking systems, enhances visibility along with reducing costs and improving efficiency, while enabling businesses to leverage change in real-time.
