Supply chain and logistics management - both are critical for success

Jonas Mehrhoff

Supply chain and logistics are often grouped together, making them seem like part of the same entity, but this is not the case. It’s true that we need both to ensure an optimized, smooth running supply chain, but it’s important to understand they do very different things. While the two often intersect, they are not interchangeable.

What is supply chain management

Supply chain management is the holistic management of a company’s processes, ranging from sourcing of raw materials to final customer delivery. This includes oversight into the performance of all stakeholders, selection of the different tiers of suppliers, analysing and monitoring their performance, and interaction with service providers and other partners involved.  Although there are many definitions, emphasis on the following four pillars are the most vital in leading companies’ supply chain management today.

Purchasing. Supply chain managers must ensure the materials they’re sourcing for their organization are cost effective and delivery on their customer promise. It’s imperative that supply chain managers coordinate accordingly with suppliers to ensure production, procurement and delivery of these materials run smoothly.

Operations. Operations management is key in that supply chain leaders must have a deep understanding of forecasting demand in order to avoid having a surplus or too little inventory. Miscalculations in this area could ultimately lead to detrimental financial losses in revenue, making it vital for a supply chain’s success.

Resource management. Resource management is an essential player in an organization’s supply chain. It ensures that the necessary resources move appropriately across the supply chain, which aids in the optimization of your production schedule and boosts your efficiency. Resource management ultimately ensures that you never over-promise orders and that your production schedule remains realistic and attainable.

Logistics. Logistics is a key pillar of supply chain management as it encompasses everything from planning, purchasing, warehousing, production, transportation of goods, and so on. These operations are at the heart of any supply chain. Logistics is focused on the end customer; making them a priority when facing any challenges that may arise.

What is logistics management

Logistics is an essential component of supply chain management involved in strategizing ways cargo moves from origin to destination using unimodal or multi-modal transport systems. While it’s represented as a pillar of supply chain management above, its importance is steadily increasing. Logistics management is critically involved in the coordination and monitoring of transportation, shipping, receiving, warehousing, inventory management and distribution. Logistics management is centred around transportation planning, cost management, and execution of transportation with constant integration of stakeholders and partners involved.  

Effective logistics management plays a vital role in influencing the movement of products to meet customer demand.  

Similarities

Many similarities lie between logistics and supply chain management. They both seek to ensure the supply chain runs smoothly and the end customer is satisfied. While they both oversee the flow of goods, they also prioritize proper coordination of labour, materials, and various facilities to ensure the efficient movement of all goods across the supply chain. Supply chain management also sets the framework and strategy for logistics to run smoothly, whether that be inbound or outbound transportation. They both focus on the journey of goods to the customer and the overall customer experience; two vital pieces of making a successful and reputable name for your supply chain.

Differences

Now, while the similarities outlined above are evident, there is an overarching difference between the two that cannot be misinterpreted. Logistics is concerned with specific activities in the supply chain, whereas supply chain management takes on the inner workings of the supply chain as a whole. The management of logistics in your supply chain is only concerned with the ins and outs of productions, the efficiency of transporting goods and ultimately keeping your organization’s promise to the end customer. Supply chain management covers a much deeper scope including production, strategy, sourcing and many others. Supply chain managers must equip themselves with the right tools and knowledge to oversee, constantly improve and optimize internal and external processes, plan ahead and mitigate any problems that may arise.

How they work together

Over the most recent decades, we’ve seen an incredible shift in what supply chain leaders are now prioritizing in their organizations. As internal and external stressors become increasingly evident, supply chain managers are never sure what challenges might be waiting for them.The world is quickly becoming more complex, volatile, and disrupted, making running reliable and cost-efficient supply chains incredibly challenging.  Customers are also becoming more accustomed to a fast-paced lifestyle, making their expectations of expedited processes a main pressure point on supply chains everywhere. In light of this new reality, the underlying purpose of effective logistics performance is to gain competitive advantage, increase overall productivity and ensure profitability in the company’s operation.  

Effectively integrating logistics into your supply chain management activities allows supply chain leaders to overcome impending risks involving inventory, delivery and lead times. This ultimately gives decision-makers the time necessary to respond to disruptions along the chain.  

Placing an emphasis on your organization’s logistics operations and management is key in forecasting such challenges, as it gives supply chain managers critical insight into what operations are successful and where they might see pitfalls. Logistics integrations pave the way to a smooth-running supply chain, ultimately enhancing performance and keeping supply chain managers constantly up to date.

Conclusion

Supply chain management and logistics both play a key role in meeting customers’ needs and improving the overall customer experience. Through effective logistics and resource planning, supply chain managers can minimize risks and the likelihood of cargo damage, assembly line stoppages, and unfulfilled delivery. Working in conjunction, logistics provides insights into customer demands that supply chain management can use to plan operations accurately and accordingly. Ultimately, an efficient supply chain cannot run without optimized, reliable logistics.

If you work with global supply chains, here are ways we can help you gain full control and visibility over your shipments.
1
If you’re operating with spreadsheets and disparate sources of data, learn more about how a digital platform can provide you with supply chain visibility in this free guide.
2
If you’d like to learn more about how to leverage your ERP with a supply chain platform, check out our free guide.
3
For more supply chain best practices, visit our resources page.
4
Ready to learn more about Orkestra? Book a call with our team of experts.

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