In this week’s discussion topic, define the meaning of the term “Supply Chain.” The term is used rather freely these days, but what does it actually mean?
What might the term “Supply Chain” cover that is not included under the term “Logistics.”
To be considered substantive, your reply should add significantly to the discussion by building on others’ comments, pointing out similarities or differences in your backgrounds or course expectations, etc. One or two sentence responses such as “Hi, welcome to the course!” or “I feel the same way” are not acceptable.
This week’s topics:
Definition of the Supply Chain versus Logistics
Instructions: Your initial post should be at least 250 words. Please post more than 2 reply responses of 100 or more words to your classmates or the instructor. Responses should be a minimum of 100 words and include direct questions. Please review the attached rubric for more details on the forum requirements.
Introduction to the Definition of the Supply Chain versus Logistics:
Logistics versus supply chain or is it supply chain and logistics? While I was at a local hardware store the other day, I started to think about just how much of a role we play in the whole supply chain picture. Think about it, some of us are suppliers, some are distributors and we are all consumers. Logistics also takes on a significant role here. Thanks to our customers, we may well be one of the means through which the pieces of plywood I needed eventually reached this store I was shopping in, and ultimately my kitchen at home. But we are only one of the links in a long complex chain. To make sense of it all, although many tend to assimilate the meaning of “chain management” with “logistics,” there are bold differences between the two which cannot simply be summed up in one or two sentences. So here goes my attempt to help clarify these distinctions.
Body of Information
In the UK, as well as the United States, one can observe the new name on a freight transport vehicle that was previously called ‘Fred Smith Transport’ and is now called ‘Fred Smith Logistics’. Logistics can therefore be a confusing word and, additionally, some people use the term ‘logistics’ to describe their own internal company process, and use the supply chain term, when they are dealing with external suppliers/customers. At the risk of further confusion, others also call their internal logistics processes an internal supply chain! In the meantime, when we hear the three terms ‘logistics’, ‘supply chain’ and ‘distribution’, they are strongly recommended to ensure that they have the full understanding of what the originator means when each term is being used. This can be very important and prevent confusions; for example, ‘Fred Smith Logistics’ is unlikely to have a clue about whether to outsource the manufacture of sub-assemblies or whether these can be manufactured internally. This would often be a strategic supply chain decision (but then again, some would say it is strategic logistics decision). The location of the warehouse(s) can be a critical decision. Clearly for a business that is involved in manufacturing, its raw materials stores are likely to be the production sites, and the stores location is therefore determined by the location variables of the production sites. However, this is not an absolute and, for example, the Nissan car factory based at Washington, Tyne and Wear, holds little raw material stock on site as it follows a synchronized just in time (JIT) system with its suppliers (mainly located in the West Midlands), so that raw materials are received and the line is fed immediately.
Logistics and Supply chain Management are two areas that are often felt that they could overlap. It is possible that different companies define them differently. Logistics deals with strategy and coordination between marketing and production. Whereas, supply chain management focuses more on purchasing and procurement. This is one of the main differences between logistics and supply chain management. It is interesting to note that supply chain management can include factors relating to inventory, materials and production planning too in its concept. Logistics includes factors relating to demand management and forecasting in its concept. This is also an interesting difference between logistics and supply chain management. Experts argue that logistics management is a part of the supply chain management that plans and implements the flow and storage of goods, services in order to meet the demands of the consumers. This is indeed an important study made by the experts.
When looking at supply chain management encompasses the management of all activities involved in the procurement and conversion. In addition to these activities the supply chain management takes care of all the logistics management activities. It is important to note that supply chain management involves all movements and storage of raw materials. In short it can be said that supply chain management takes care of the design, planning, execution, control, and monitoring of supply chain activities with the sole objective of creating net value and leveraging worldwide logistics. Whereas, logistics can be simply defined as the management of the flow of goods and the services between the point of origin and the point of consumption in order to meet the requirements of customers. It is interesting to note that logistics is a business concept that was introduced for the first time in the year 1953. Business logistics is nothing but having the right item in the right quantity at the right time at the right place for the right price in right condition to the right customer. It is also interesting to note that logistics management is known by many names such as materials management, channel management, distribution, business or logistics management, business or logistics management and supply chain management. This only shows that supply chain management can be called the subset of logistics but the converse is not true. There is a thin line of difference between the two.
The overall spectrum between logistics and supply chain management is controlled by the supply chain management team, being that they are not only responsible for achieving customer satisfaction ultimately but also contributing to maximization of profit. Logistics is like the small puzzle piece fitting precisely into the supply chain management picture, being that it takes into account the projection of each step prior to the time of arrival of the expected product. Logistics and Supply Chain Management do not intertwine, in definition. None the less, mutual contribution by both leads to more than just shipping.
Knowledge Check: What are the differences between logistics and supply chain?
Answer: Logistics deals with strategy and coordination and supply chain deals with the purchasing and procurement.
Videos to support our learning:
Videos: https://youtu.be/Vu3o2-3uSKE (What is Logistics?)
https://youtu.be/Mi1QBxVjZAw (What is Supply Chain Management?)
Emmett, Stuart. Excellence in Warehouse Management: How to Minimise Costs and Maximise Value. Hoboken, NJ, USA: Wiley, 2005. ProQuest ebrary. Web. 28 May 2015.
Copyright © 2005. Wiley. All rights reserved.
“Difference Between Logistics and Supply Chain Management.” N.p., 17 Feb. 2011. Web. 29 May 2015.
“The Distinction Between Logistics and Supply Chain Management – See More At: Http://www.morethanshipping.com/distinction-between-logistics-and-supply-chain-management/#sthash.V8pNM02V.dpuf.” Http://www.morethanshipping.com/distinction-between-logistics-and-supply-chain-management/. N.p., n.d. Web. 29 May 2015.