Finance & Accounting

What is the difference between Logistics and Supply Chain Management?

Logistics and supply chain management are terms that is not new to the modern world of business and other areas that involve different activities. It has become tough for people to indicate if one is practicing logistical management or supply chain management, causing some people to use these terms interchangeably. However, it is worth mentioning that these two terms have differences that should be understood. 

What is Logistics?

Logistics is a term that is used to denote the process of handling of goods within a specific department and at the same time keeping the inventory document of the status and the whereabouts of various inventories. In other words, logistics can be defined as the process of planning of the movement of goods, its execution, and the control of its movement and other related activities.

What is Supply Chain Management?

This term has been used since long to describe activities that includes the purchase of raw materials, receiving raw materials, manufacturing, and production of goods and goods delivery to the respective customers or destinations.

On what basis does Logistics and supply chain management differ from each other?

In order to answer this question, we have provided you a table below that reflects the basis on which these two terms differ.

On the Basis of-	LOGISTICS	SUPPLY CHAIN MANAGEMENT
Goals and Aim	To ensure that customers are satisfied.	Ensuring that the company achieves a Competitive edge
Involved Organizations	Only single organization is involved	Multiple Organizations are Involved
Evolution and Development	The concept of logistics is traditional, which means that it evolved earlier than Supply Chain Management	The concept of Supply Chain management is a modern concept.
Relationship with each other	Logistics is a fraction of the supply chain management which means it comes within supply chain management.	It is the new version of Logistics management. It incorporates logistics.
Relation with other Departments	Logistics have minimal relationship with other departments	Supply chain management has significant interactions with other departments.

In the next segment, we have extensively covered the differences between Logistics and supply chain management.

Goals and Objective of Logistics and supply chain management

This is one of the major differences between these two. Their goals and objective differ within an organization. The objective of logistics within an organization is to ensure that the customer is able to get maximum satisfaction while communicating with the organization. The logistical officers ensures that the customers can easily access their needs and that it is acquired rightly.

On the flip side, the goals and objective of supply chain management is to ensure that the company has a competitive advantage through effectiveness and efficiency. Supply chain management ensure that the company procures raw materials at lower prices and sells finished goods at significant prices.

Organizations involved in Logistics and Supply Chain

The number of organizations involved in both is another parameter to assuage the difference between these two terms. As stated in the table made above logistics is involved in a single organization as there are no logistical activities that is to be done when interacting with other company. The logistical operations are limited to an individual organizations.

Whereas supply chain management is involved with more than one agency that interact with the company daily. The supply chain management should interact with organizations that supply raw materials, companies transporting finished goods, and companies purchasing their finished products.

Evolution of Logistics and Supply Chain

The evolution of logistics and supply chain is one of the fundamental difference between the two. If historians are to be believed, logistical management^[1] has been there since long and still exists despite technological development.

On the other hand, Supply Chain Management is modern that emerged in the 19^th century. It has developed so much so that all businesses and government departments have incorporated it. 

Departments and Sections

The number of departments and sections that are involved in these two shows us some significant differences between the two practices. It may be noted that the number of departments is higher in supply chain management as compared to those in the logistical department. This is due to the fact that supply chain management interacts with multiple organizations. Some of the departments and sections include warehousing, inventory, and transportation.

Relationship with one another

There is a significant relationship between Logistics and supply chain management. Although people would think that they are different with every department entitled to handle its activities, the logistical department is that section of supply chain management that handles specific tasks.

Further, the supply chain management handles activities without interfering in the services provided by the administration. This is the reason why some organizations don’t have operational or logistical department but keep operational supply chain management department that handles logistical matters.

Relationship with other Departments

Just as their interactions with other organizations wherein supply chain management is able to interact with companies, it seems that supply chain management has an edge when it comes to co-operation with other departments in an organization.

The logistical administration doesn’t have an active role in departments, whereas supply chain management has a high probability of participating in the affairs of agencies through research, marketing, etc. 

The Future of Logistics and Supply Chain Management

The standards set by companies distributing goods within a short span of time have set the bar higher for both Supply Chain Management as well as logistics. But having said that, if anyone wants to keep up they will be required to embrace the latest technological innovations. Technology is the key to success within all areas of supply chain management. It relies on the willingness to adopt internet technologies and business models.

Conclusion

Differentiating logistics and supply chain management is a crucial thing as one can have a conceptual image of measuring the performance of every department in a good manner. Further, by understanding the role of every department, conflict of interests can be prevented. Therefore every business should consider understanding what differentiates these two terms.

Read our article: Objectives and Functions of Supply Chain Management