Supply chain vs. Logistics: Similarities and differences

Every company requires a network of supplies and logistics to deliver their goods and services to their customers. Often, they use processes such as supply chain management and logistics to ensure they deliver with lower costs, increased efficiency, and minimal loss of their products. Sometimes, you may review your logistics plans and your supply chain plans separately to determine areas where you can improve each process, and understanding the differences between the two becomes very important. Consider the definitions below to learn the differences between supply chain and logistics, and explore specific aspects of each to earn a deeper understanding.

What is a supply chain?

A supply chain is a network of individuals, companies, and employees that deliver goods and services to consumers. There are several parts of a supply chain, but the primary goal of the chain is to take products from their earliest stages and deliver them as finalized products to consumers. Typically, supply chains only apply to physical goods, though there are some examples of organizations using supply chain processes to create and deliver digital goods too. There are five major stages of successful supply chains:

• Material sourcing: At this stage, you contact suppliers, such as vendors, and request particular raw materials for a product. For example, if you create tableware, you may need to source raw steel, clay, and the fuel you need to create parts.
• Manufacturing: In the second stage of the supply chain, you convert the raw materials into component parts of a product. Some processes may have several steps in manufacturing to create the components, while other processes remain simple.
• Assembly: The third stage of the supply chain is when you take each of the components you need for a product and build, assemble, or create the final product for consumers. For example, you can take melted steel and turn it into cutlery, and take raw clay and turn it into plates, bowls, and other dishes.
• Sales: During the sales phase, you introduce the final product to consumers who may want to purchase it. You may create marketing, advertisements, and other promotional materials to generate interest in your product.
• Delivery: The last stage of the process is delivery, or how you get your goods and services to customers who purchase them. For example, you may place your products on transport vehicles and distribute them to stores to sell or you may ship them directly to your customers using other transport means.

What are logistics?

Logistics are the processes organizations use to acquire, store, and transport resources. Logistics resources are those that are both the materials used to create goods and services, and the products themselves. The goal of logistics is to minimize costs and maximize the efficiency of moving resources. Originally, logistics was a military term describing how militaries moved supplies to support active deployments. Logistics can apply both internally for an organization and externally to the same organization. Below are descriptions of six types of logistics:

• In-house: This is a type of logistics where a company plans, creates, and manages its own transportation of resources. This is an effective way to reduce costs, but it can add more processes to the companies that use it.
• Logistics service providers: These are a type of logistics company that specializes in providing logistics services for other organizations. They may handle all logistics tasks and work with multiple companies to store, move, and acquire materials.
• Third-party logistics: These are a type of logistics company that specializes in providing a single logistics service to other organizations. Where LSPs may provide several logistics functions, 3PLs may provide only transportation or only storage.
• Reverse logistics: This is a type of logistics when an organization reclaims any unused materials or products from locations and uses those materials or products to create new ones. For example, a company may reclaim its unsold stock from a warehouse and convert the stock into new products.
• Warehouses: This is a way to store materials and resources. Many organizations use warehouse providers to store their products and materials if they have limited storage capacities.
• Couriers: Couriers are people who carry documentation for shipments. Some couriers may travel with the resources, while others may only deliver documentation.

“The primary difference between supply chain and logistics is the full breadth of processes each one includes.”

Similarities and differences

Below are the similarities and differences between supply chain and logistics:

Scope

The primary difference between supply chain and logistics is the full breadth of processes each one includes. Generally, the supply chain is much larger than logistics, since logistics only covers the acquiring, storing, and moving of materials. This means logistics is part of the supply chain, but the supply chain has many other processes. For example, a company that creates metal sculptures may have logistics to cover transport and storage but needs supply chain management to sell and deliver the final products.

Focus

The focus of the supply chain and logistics are different. In the supply chain, the focus is the complete care and processing of materials into final products that a customer purchases. In logistics, the only focus is the storage, transport, and acquisition of resources. To put logistics in terms of the supply chain, logistics doesn’t include manufacturing, assembling, or selling products. For example, the logistics to acquire gold and make it into jewelry may include acquiring the gold, moving the gold to a manufacturing facility, moving the jewelry to a distributor, and finally moving the jewelry to the customer.

In contrast, the supply chain of the same company is to acquire the gold, transport it to the manufacturer, manufacture the gold into usable materials, assemble the usable materials into jewelry, sell the jewelry to customers, and deliver the final jewelry product to customers. Each of the steps in the supply chain may also have further actions to ensure high-quality products for customers.

Goals

The goals of the supply chain and logistics also differ. In the supply chain, the goal is to manage all aspects of material acquisition, usage, sale, and delivery. In logistics, the primary goal is to move, store, and acquire resources. This difference affects both the scope and goals of both processes and creates differences in how supply chain managers and logisticians or logistics managers handle both of those processes.

Benefits

Having both supply chain management and logistics can be beneficial. Supply chain management can help an organization understand the entire process of getting materials and making goods and services. This can encourage them to decrease the costs of their production and find more sustainable methods of production for their goods and services. For logistics, understanding its processes can help organizations and leaders plan efficient and cost-effective ways to acquire resources and move them to key locations.

Now that you’ve learned about the differences between the supply chain and logistics for organizations, you’re ready to create a profile on CareerBuilder.com.

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