Have you ever wondered how easily the products you ordered online reached your doorstep? In today’s fast-growing world of businesses, logistics and supply chain management play a vital role in the processes that make their easy way to your doorsteps. So, the next question is: What exactly are logistics and supply chain management? And how do logistics and supply chains differentiate from each other? Then you are in the right place. In the dynamic business era, understanding the core elements of logistics and supply chain management is important to grow the business or achieve successful career growth in the highly demanding field of logistics. Logistics and supply chain management help to improve customer satisfaction and business growth. Let’s dive into the behind-the-scenes magic of logistics and supply chain management that makes sure the products get to the customers.
What is logistics?
Let’s talk about logistics. Logistics is about moving goods from one place to another efficiently and effectively through transportation, warehousing, inventory management, order fulfilment, and distribution. It involves efficient planning, coordination, and the latest technology to get the right product to the right place at the right time without compromising the quality of the product. For example, imagine that you got your new mobile phone ordered online. Logistics ensure the phone goes from the manufacturing point where it is made to the warehousing point where the products are stored and to the final destination at your doorstep.
What are the components of logistics?
Logistics management is the process that involves transportation, warehousing, inventory management, order fulfilment, and distribution. Let’s discuss each one to understand the steps and processes involved in logistics.
1. Transportation: Transportation is a vital area in logistics that ensures the safe movement of the final product or the raw materials from one location to another, whether by land, sea, or air. Effective transportation helps the products reach their destination on time without compromising the quality. It can be accomplished with effective planning, which involves figuring out the best route to save as much time and money as possible and selecting the most appropriate mode of transportation based on factors like price, speed, and product type.
2. Warehousing: Warehousing is about storing the goods or products they need to deliver. An efficient warehousing system saves time and money by effectively organizing the products, keeping accurate records of stock levels, and ensuring the safety and security of the products stored in a warehouse.
3. Inventory Management: Inventory management is about ensuring the accurate quantity of goods without overstocking or running out. Inventory management activities include maintaining or keeping the optimum inventory level, reordering the products to avoid stockouts, measuring sales, and replacing inventories.
4. Order Fulfillment: Order fulfilment involves receiving, processing, and delivering the goods or products to the final customers. Three processes are included in order fulfilment: selecting and packing the merchandise from the warehouse and ensuring the goods are delivered on schedule.
5. Distribution: Distribution is the final process that delivers the final products by planning the distribution network, managing various channels, and monitoring delivery performance. Effective distribution systems ensure that products are delivered to customers on time and without any damage.
What is supply chain management?
Let’s move on to the overview of supply chain management. The process of controlling the movement of goods from a supplier, manufacturer, wholesaler, retailer, and customer is known as supply chain management. Supply chain management is important for every company to improve efficiency, increase customer satisfaction, and reduce risk and cost. Procurement, production, distribution, demand planning, supplier relationship management, and customer service are all parts of the supply chain management (SCM) process.
Components of Supply Chain Management
Let’s move on to the components of SCM. The SCM process can be effective by following the six steps from procurement to customer service:
1. Sourcing or Procurement: Procurement is about sourcing and purchasing the raw materials needed for manufacturing the final product. The activities include identifying the suppliers, negotiating with the suppliers, and maintaining relationships with the suppliers. The important thing in the procurement process is to purchase the raw materials at the lowest cost with quality and quantity.
2. Production: During the production stage, the manufacturing process needs to be effectively managed to meet standards. Production planning is an important phase that transforms raw materials into final products with quality outputs.
3. Demand Forecasting: Predicting the current demand for the products helps to decide the right quantity of products to be produced. This helps to avoid overstocking or waste of goods by keeping track of inventory levels.
4. Supplier Relationship Management: Developing and maintaining a healthy and strong relationship with the suppliers is essential for an efficient supply chain management process. Collaboration with suppliers, performance monitoring of suppliers, and supplier-related risk management are part of the supplier relationship management process.
5. Customer Service: The customer service process is aligned with the three steps of order management, customer support, and return management. Customer satisfaction is how well customer service handles orders, offers pre- and post-purchase assistance, and handles returns and exchanges.
What are the differences between logistics and SCM?
After reviewing the general concepts of supply chain management and logistics, it is time to discuss how they differ. It is better to walk through a real-world example to understand the differences between supply chain management and logistics rather than just putting a table with the main differences highlighted on it. Imagine you own a company that manufactures and sells mobile phones. What are all the important activities for the logistics and supply chain parts?
LOGISTICS
PARAMETERS LOGISTICS MANAGEMENT PROCESS
Transportation Transport various raw materials needed to produce mobile phones to the manufacturing point. Plan and determine the most effective route and the best transportation method for reducing time and cost.
Warehousing After the completion of the manufacturing process, store the mobile phones in a warehouse and organize them to maximize space and easy access to the products.
Inventory Management Track the number of mobile phones stored in the warehouse and ensure the stock meets the current demand without overstocking.
Order fulfillment Take them out of the warehouse and prepare for shipping, depending on how many orders customers or retailers have placed.
Distribution Evaluating and determining the most effective method and route to deliver the smartphones to retailers and customers on time and with quality.
SUPPLY CHAIN MANAGEMENT (SCM)
PARAMETERS SCM PROCESS
Procurement The first step is to evaluate and determine the suppliers who provide the best quality raw materials and are cost-effective within the required time.
Supplier Relationship Management Ensure a reliable supply of raw materials that meet your needs by building and maintaining a strong, long-term relationship with suppliers
Demand Forecasting Keep updated, analyze the current market trends in the mobile phone market, and forecast the number of mobile phones you will have to manufacture in the future.
Production planning Coordinate the production process by ensuring quality output based on the demand of customers or retailers.
Customer service Provide customer support before and after the sale by answering questions and queries, handling issues, and satisfying customers.
CONCLUSION
In today’s fast-paced business environment, supply chains and logistics are essential components of any enterprise apart from Hospital administration. Logistics and Supply Chain Management (SCM) is a single term used in businesses because they are interconnected. However, by distinguishing between supply chain management and logistics, we can understand the key differences between them and how they are interconnected. While SCM organizes the various steps involved in the production and distribution of the finished product, logistics concentrates on the efficient movement and storage of goods. Logistics ensures the products or raw materials are transported accurately, on time, with quality and quantity at the right place. SCM ensures that, in response to consumer demand and satisfaction, the entire supply chain runs smoothly. Logistics is an inevitable component of supply chain management that improves the efficiency and accuracy of the process. Understanding logistics and supply chain management and key differences helps the business streamline operations and function smoothly.
