What is supply chain management, what is logistics?
September 22, 2011 6 Comments
Over the last month or so there has been an ongoing debate on Linkedin trying to answer the question of “how do you differentiate supply chain management and logistics?”. Reading the debate has highlighted a number of things:-
1) The standard of debate is very high and people care deeply about this issue
2) Widespread disagreement exists over what constitutes logistics and what constitutes supply chain management
3) The terms are used differently by different companies and individuals
4) The terms are vague and not adequately defined
This has led to a general confusion and disagreement over the meaning of the exact terms. In this short article I am going to provide some definitions of the two terms.
A number of definitions exist for example CILT define logistics as:-
‘the time related positioning of resources to meet user requirements” this involves getting the right product to the right place in the right quantity at the right time in the right conditions at the right costs’
Although this sounds simple achieving the 6Rs can be immensely difficult. As such Logistics includes functions such as transport, warehousing, order processing and customer services and it entails the movement of goods from point of origin to the point of use.
Supply Chain Management
Supply chain management developed from the logistics literature, with it being introduced by consultants in 1982. SCM focussed on facilitating product movement, and the coordination of supply and demand by retailers who had begun to compete by the management of materials. However, the concept is not well defined and this has led to widespread debate and confusion. A variety of definitions exist such as that of Christopher 1998
‘the management of upstream and downstream relationsjips with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole’
The above definition focussed supply chain management on the management of relationships with the aim of optimising the whole system rather than individual elements.
The growth of supply chain management has led to debate over how supply chain management and logistics are related and this has led to new definitions of logistics which include SCM in the definition, for example:-
‘that part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption’
The debate on linkedin has highlighted a lack of consensus over how SCM and logistics are related. A search of the literature and the debate shows there are 4 different perspectives
Traditionalist perspective argues that SCM is a small part of logistics often referring to SCM as ‘logistics outside of the firm’
Relabeling perspective argues that SCM is simply the renaming of logistics. This is a common view in organisations where the title and roles of a logistics manager and a supply chain management are often interchangeable and within the academic debate
Unionist Perspective this argues that logistics is part of SCM. With SCM being an across business function including:-
- Customer relationship Management
- Customer Service
- Demand Management
- Order Fulfilment
- Manufacturing flow Management
- Product Development
Intersectionalist perspective – This argues that SCM is a broad strategy which cuts across business processes and is therefore not the union of various functions as described by the unionist
As a definitive answer does not exist it is up to individuals to decide the perspective that they take. Personally I take a unionist view with logistics being a subset of SCM