What is Supply Chain Management?

Supply chain management is the planning and execution of all processes involved in a product’s entire journey through a business. So, this includes the purchasing of raw materials and their journey into the company. Then they are manufactured into a product and distribution into the hands of the consumer.

Supply chain management also includes the planning of this journey, before making any purchase and continuous analysis of the whole process for potential improvements.

What is Logistics Management?

Logistics is the transportation of all raw materials and products within a business. It includes managing any storage, facilities, equipment, and personnel required to get materials between set points along a supply chain.

How Supply Chain Management is Different from Logistics

Let us look at a pen manufacturing company as an example to understand the key differences and similarities between both terms.

Logistics would cover organizing the shipping of ink and plastic from suppliers to the manufacturing plant. Responding to disruption along the routes when it appears. Ensuring there is a continuous flow of these raw materials into the plant and staff are in the right place at the right time to load, unload and manufacture. Then booking warehouse space to store finished pens. Before arranging their distribution to chosen sales markets, including completing relevant customs documentation.

Supply chain management would cover all that, plus additional business critical decisions. Such as, where to source the ink and plastic for the product. Assessing whether there is a better transport method to use. Making sure the company has enough qualified personnel and the right machines on site to move and manufacture pens. Evaluating whether the best commodity code is being used.

Then packaging up and choosing where to store the finished pens until distribution to the chosen target market. Finally, assessing the transportation method used for their distribution.

Continually weighing up the positives and negatives of all these tiny steps to maximize returns, is where supply chain management is different to logistics. Always analyzing for inefficiencies.

Could we source plastic from closer to our manufacturing plant? Are we utilizing all our factory space? Is our transportation as eco-friendly as it could be? Can we get a cheaper storage rate elsewhere? Could we slimline our storage and distribute pens immediately? Are there any changes that could be made to the customs declaration which could save time?

All those big, analytical decisions fall under supply chain management, but outside logistics, which is only the day-to-day management.