Supply chain management refers to the movement of supply chains of an organization whereas logistics management refers to the process of flow and storage of goods in an organization.
Logistics Management
Logistics management is a process that integrates the movement of goods, services, and information directly from the sources of raw materials until they reach the final consumer or beneficiary.
The objective of this process is to provide the right product with the right quality at the right time and at the right place at the right price to the end customer. Logistics activities fall into two main categories, inbound Logistics, and outbound logistics.
What Are the Types of Logistics?
There are two types of logistics activities, inbound and outbound logistics.
- Inbound Logistics means the activities related to procurement of materials, handling, warehousing, and transportation.
- Outbound Logistics means the activities related to the collection, maintenance, distribution, or delivery of the materials to the final consumer.
Supply Chain Management
It is a series of interrelated activities related to the transformation and transportation of raw materials into finished goods until they reach the end-user. It is the result of the efforts of many organizations that helped in the success of these activities.
Main Components of Supply Chain Management
There are five main components of supply chain management and they are as the following:
- Planning
- Sourcing
- Inventory
- Transportation
- Return of Goods
1. Planning: Planning and managing all the required resources to fulfill the customer's requests for a product or service from the company. When the supply chain is established, you need to define metrics to see if the supply chain is efficient and effective, delivering value to customers, and meeting company goals.
2. Sourcing: Select the suppliers who are responsible for providing the goods and services required for the release of the product. Next, create processes to monitor and manage supplier relationships. The main processes include: ordering, receiving, managing inventory, and granting payment authorizations to suppliers.
3. Inventory: It is the process of organizing the activities required for raw material acceptance, product manufacturing, quality testing, packaging for shipment, and delivery schedule.
4. Transportation and Delivery: It is a process of moving and delivery of raw materials to their final products.
5. Return of Goods: It is a process of recovering defective, excess, or unwanted products.
Commercial Logistics vs Humanitarian Logistics
We often hear about the supply chain or logistics from the commercial world of transportation and shipping, receiving, and sending goods to different parts of the globe, which is done by the global giants, like UPS, FedEx, and DHL.
- We can say that within commercial logistics the typical issue is to try to maximize your profits. The objective is to maximize your profits, whereas, in humanitarian logistics, we talk about minimizing losses. The demand in commercial logistics is stable and predictable, whereas in humanitarian logistics it is highly variable in terms of timing, locations, and products.
- If we’d look at the distribution networks, we have an accurate determination of the number and location of distribution centers within commercial logistics. Whereas in humanitarian logistics we have unknown locations, poor infrastructure, and unexpected events.
- Inventory management in commercial logistics is definitely easier because of well-defined inventory levels based on the lead time, demand average, and target service levels.
- In humanitarian logistics, this is challenging because of high variability in lead-time, demand, and locations.
- In commercial logistics information, systems are reliable, thanks to advanced technology. In humanitarian logistics, it is often unreliable, incomplete, or nonexistent.
Conclusion
Both supply chain and logistics management are inseparable. Thus, they do not contradict but complement each other. SCM helps logistics communicate with the transportation, warehousing, and distribution team.
