Supply chain and logistics are both involved in the process of moving goods, but exactly how do they differ?
Here’s an easy way to make sense of the differences using an analogy:
If the movement of goods were compared to a football game, the supply chain would be like the coach overseeing the field and positioning assets, whereas logistics would be the quarterback who executes moves and adapts to conditions on the fly.
Supply Chain vs Logistics: The Differences in Detail
Despite some individuals and organizations using the terms interchangeably, there are further important differences between their individual functions, capabilities, inputs, and outputs of each.
Because the global movement of products relies on the underlying principals of sending, receiving, moving, and storing goods, it’s no surprise that the terms “supply chain” and “logistics” have become conflated and are often confused with each other.
Another way to perceive the difference is that supply chains are responsible for the overall sourcing, processing, and delivery of goods to the end customer, whereas logistics focuses on moving and storing goods between different supply chain organizations.
The Role of Logistics
Logistics Can Be A Subsection of the Supply Chain
The Council of Supply Chain Management Professionals, or CSCMP.org, describes logistics as:
“part of the supply chain process that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer’s requirements.”
Logistics as a Segment of the Supply Chain Process
Most importantly, logistics is a distinct part of the supply chain and essential to good supply chain performance.
A supply chain may have many diverse types of logistics and logistics companies to serve specific needs, all of which designed to help the supply chain run smoothly.
However, each logistics operation is only responsible for that service with which they have a particular expertise, often making them a self-contained part of the supply chain.
Logistics Controls and Plans
Because logistics providers are typically only responsible for their part of the supply chain, they will:
- Plan the movement of goods from one place to another, store those goods, and produce appropriate information and documents for efficient reporting and processing
- Execute the movement and storage of goods using multiple types of transportation and arrange for short or long-term storage
- Control the movement of goods how through fleet management, shipment tracking, technology, information sharing and work with the supply chain partners
- Create extra value for supply chain partners
Logistics Moves Goods from Place to Place
A good logistics management system is all about efficient transport and storage.
Logistics providers commonly use a variety of land, air, and ocean assets to move goods as quickly and efficiently as possible.
Logistics companies will take advantage of containerization to improve the flow of goods between types of transportation, also known as “intermodal” transport.
Logistics Provides Storage of Goods Within the Chain
Logistics providers will store goods in warehouses or other facilities as they reach their destination.
Using various types of warehousing, they’ll keep goods until they are needed further down the supply chain, which can be another supply chain organization or delivery to an end customer.
Logistics Distributes Products to the End Customer
Some logistics businesses specialize in distribution—delivering goods to the final customer, typically known as “Last Mile Delivery” and often including a “Milk Run“.
Logistics Organization Types
Basically, if products are being transported or stored, it’s a logistics process. The many types of logistics businesses include:
- Third-party logistics (3PL). These specialist logistics providers offer a suite of services such as freight by air, railway, roadway, or specialized transport and storage facilities such as cold storage
- Warehouse providers: Some logistics businesses only store goods without offering transportation
- In-house logistics: Large enough wholesalers, retailers and other organizations may have their own in-house logistics function
- Logistics Service Providers (LSPs): Companies that provide broader management over the flow of goods between points of origin to end-use destination. They often handle shipping, inventory, warehousing, packaging and security functions for shipments.
- Reverse logistics: These organizations specialize in returning products to manufacturers, for example in customer service where products are defective, or the customer did not want the item
- Courier shipping: Specializing in last mile deliveries, these logistics providers deliver products to end customers
In summary, logistics is a limited, distinct part of a larger, collaborative supply chain network.
The Role of Supply Chains and Management
“Supply chain is the entire flow that brings a product or service to sale. Logistics is a segment of that, focused on the transportation and storage of goods.”
Chief Operating Officer, HighJump
Supply Chains are the Framework for Sourcing, Manufacturing and Supplying Products
Ultimately, the supply chain represents all the associated connections and collaborations between suppliers, manufacturers, logistics providers, wholesalers, retailers and end customers.
The supply chain process starts at the point an organization gets an order for a product or service, and finishes when that product or service is successfully delivered to the end customer.
Supply chain management is the function that oversees and coordinates the manufacture, transportation and delivery of goods and services between their origin, and their final destination.
Supply Chain Management Works Across Multiple Organizations
Overall, the supply chain brings together the partners needed to source, manufacture, transport, store, supply and sell goods:
- Suppliers: Produce the raw materials or parts needed to manufacture products
- Manufacturers: Create new parts or products from raw materials and other inputs
- Logistics: Transport and store goods as they move through the supply chain
- Wholesalers: Purchase goods for distribution to stores or retail outlets
- Retailers: Sell the finished goods to end customers
Supply Chains Can Also be Responsible for Other Areas
The overall concept of supply chain management often means controlling other aspects of the order, inventory and supply chain processes:
- Promoting collaboration and partnerships: Providing partner links and better ways for different supply chain organizations to work together
- Inventory management: Monitoring when stock of particular products is falling behind and arranging the procurement of new items
- Order management: Raising orders with suppliers, manufacturers and related organizations in the supply chain
- Order, asset and shipment tracking: Overseeing the flow of orders, goods and other assets through the global supply chain
- Visibility: Providing reports on the flow of goods through the supply chain
- Troubleshooting: Identifying and resolving issues around speed, cost, quality or other aspects of goods as they move through the supply chain
A well managed supply chain provides a competitive advantage to every organization involved.
While the overall supply chain is responsible for marketplace successes and revenues, logistics plays a critical, central role in ensuring raw materials, parts and finished products move fluidly through the global supply chain.
Do supply chain and logistics mean the same thing?
In summary, supply chains are responsible for the overall sourcing, processing or manufacturing, and delivery of goods from the raw materials to the end customer.
Logistics is the business of moving and storing those goods between different supply chain organizations.