Supply chain and logistics: what is the difference?
Supply chain management is understood still as a synonym for the “Logistics” term. However, the SCM concept significantly differs from the classical understanding of logistics. And also, provides an opportunity to look at key business processes much more broadly. Let’s see what is the difference between these two concepts. And what is the role of logistics in SCM?
Logistics is the direction of the company’s activity, which consists of the management of material, financial, information, personnel, service flows. This is a way of organizing, managing, and controlling the movement of goods. Also, it includes a transfer of information with the identification of the most rational methods and ways.
It is necessary to find out what tasks the logistic solves to fully understand what it is for. The key logistic processes at the enterprise are:
- organization of purchases;
- warehouse management (WMS) logistics is used to automate the management of warehouse complexes;
- maintaining the optimal amount of reserves and their distribution;
- transportation of goods (the transport process in logistics provides for the choice of route and type of transport, calculation of the optimal cost of transportation);
- tracking the location of the cargo, as well as solving problems that arise along the way;
- work with the return of products.
Thus, the logistics management system implies the movement, storage, and distribution of goods from initial production to final delivery to the consumer. It is the management of the processes such as transferring goods or services from suppliers to consumers. Moreover, the transfer should be carried out at the optimal time and on favourable terms.
Logistics is an important and integral part of supply chain management. All logistics work processes such as purchasing, warehousing, distribution, and transportation of goods must be competently organized. They must achieve the company’s goals.
Supply chain management functions
Nowadays, supply chain management is a more global category than logistics management. The SCM model considers business processes not only within an individual company but also its suppliers and customers, which are linked to a single chain. The concept also includes processes of analysis, planning, procurement, inventory management in supply chains, production, and customer service. This approach provides an opportunity to look at business processes that occur outside the enterprise, but have a key impact on its effectiveness.
The goal of supply chain management is to maximize the competitiveness and profitability of the company. Likewise, the entire supply chain network, including the end consumer.
Thus, SCM covers all stages of the logistics processes and sets up the channels through which the company will interact with consumers and suppliers.
Supply chain management focuses on the following key business processes:
studying the supply and demands in the market and building production on its basis;
- improving the level of service;
- an increase in the number of orders;
- improvement of production processes;
- control and optimization of warehouse stocks (goods should not be in a “dead weight”, and there should not be a shortage);
- development of a continuous supply chain;
- product development management;
- increased profitability;
- the management of return material flows;
- the constant introduction of new distribution channels.
Thus, the supply chain is the relationship between suppliers, manufacturers, logistics organizations, wholesalers, retailers, and end consumers.
The difference between the SCM concept lies in the synchronization of all links in the supply chain and planning models and their management based on common information channels with suppliers and customers.
Automation of logistics and supply chain management greatly simplifies the work of staff. Modern innovative technologies allow running smoothly and quickly for business processes. Logisticians get effective planning and supplying chain management tools to improve the level of service to customers. They use cloud services for this. So, the GoRamp cloud solution makes all logistics operations consistent and automated, and also allows you to manage all flows in one place.
Besides, cloud solutions are easier to adapt to change. It is difficult to reconfigure local applications and logistics programs of its design during the change in certain circumstances. That often arises at the stages of logistics.