What is Logistics and Supply Chain Management?

What is the difference between Logistics and Supply Chain Management? Many people use 2 terms interchangeably but what is the relationship between both terms?

What is Logistics and Supply Chain Management?
The simplest explanation about logistics and supply chain management can be summarized as below,
"Logistics refers to activities within a single organization and supply chains refer to networks of companies that work together. Also, traditional logistics focuses on activities such as procurement, distribution and inventory management. Supply chain management also includes marketing, new product development, finance, and customer service" - from Essential of Supply Chain Management by Michael Hugos

What is Logistics?
We will dig deeper to see more simple meaning of logistics as below,
"Logistics is about getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time, and at the right cost (the seven Rs of Logistics)" - from Supply Chain Management: A Logistics Perspective By John J. Coyle et al

In the past, various logistics tasks are under different departments but now they are under "logistics department" and report to the same logistics head as below,




What is Logistics Management?
We will also explore more deeply about logistics management as below,
"Logistics management deals with efficient and effective management of day-to-day activity in producing the company’' s finished goods and services" - from Integral Logistics Management by Paul Schönsleben

What is Supply Chain?
We know for the fact that supply chain refers to "network" but let's have a closer look at it as below,
"Supply Chain is the network of organisations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer" - from Logistics and Supply Chain Management by Martin Christopher

Simple structure of supply chain network can be depicted as below,



What is Supply Chain Management?
Each researcher defines supply chain management differently. However, we would like to offer the definition as below,
"Supply chain management is a set of approaches utilized to integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed in order to minimize systemwide costs while satisfying service level requirements" - from Designing and Managing the Supply Chain by David Simchi-Levi et al

According to this book, supply chain management can be categorized as below,

1. Logistics Network Design: how to choose facility location quantitatively and qualitatively

2. Inventory Management: various techniques used to develop the good forecasting models and how to determine the right inventory policies

3. Value of Information: how coordination in supply chain can help to reduce lead-time and improve service to customer

4. Distribution Strategies: all aspects of material flows through the supply chain including issues in transportation and warehousing such as vehicle routing, fleet management and material handling

5. Strategic Alliances: how to create a firmed relationship with suppliers and service providers

6. International Issues: examine how well each company operates in multiple countries

7. Product Design and Development: the method used to design the new products and how to introduce them to customers successfully

8. Customer Value: how to measure value to customer and make good proposition of good products and services

9. Information Technology: application of information technology such as ERP, EDI, e-commerce and supply chain analytics

What is the History of Supply Chain Management?
When was supply chain management developed? Supply chain management concept can be traced back to the intense competition in textile industry worldwide in 1980's. Prominent figure in the United States apparel industry formed the “Crafted with Pride in the USA Council” in 1984. They were commissioned to conduct the analysis. The results revealed that total lead-time in apparel industry took 66 weeks long from raw material to consumer; 40 weeks were spent in the warehouse or in transit. So, Quick Response strategy (QR) has emerged to make suppliers and retailers works together to shorten lead-time. “Crafted with Pride in the USA Council" became Kurt Salmon Associates in 1993.

In 1993, a group of grocery industry leaders formed a task force to examine grocery industry (ECR Working Group). They identified best practices and take an implementation of SCM concept into action. They projected an overall reduction in pipeline inventory of 37 percent.