What is Logistics and Supply Chain Management? | Asian Way

What is Logistics and Supply Chain Management?

What is the difference between Logistics and Supply Chain Management? Many people use 2 terms interchangeably but what is the relationship between both terms?

The simplest explanation about logistics and supply chain management can be summarized as below,

“Logistics refers to activities within a single organization and supply chains refer to networks of companies that work together. Also, traditional logistics focuses on activities such as procurement, distribution and inventory management. Supply chain management also includes marketing, new product development, finance, and customer service” – from Essential of Supply Chain Management by Michael Hugos

Structure of Logistics Organization

In the past, various logistics tasks are under different departments but now they are under “logistics department” and report to the same logistics head as below,
Structure of Supply Chain Network
According to Logistics and Supply Chain Management by Martin Christopher, “Supply Chain” is

“the network of organisations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer”

Simple structure of supply chain network can be depicted as below,
Chart 3
Basic Supply Chain Management Concept

SCM concept can be traced back to the intense competition in textile industry worldwide.  Prominent figure in US apparel industry formed the “Crafted with Pride in the USA Council” in 1984 (then become Kurt Salmon Associates in 1993). They were commissioned to conduct the analysis. The results revealed that total lead-time in apparel industry took 66 weeks long from raw material to consumer; 40 weeks were spent in the warehouse or in transit. So, Quick Response strategy (QR) has emerged to make suppliers and retailers works together to shorten lead-time.

In 1993, group of grocery industry leaders formed a task force to examine grocery industry (ECR Working Group). They identified best practices and take an implementation of SCM concept into action. They projected an overall reduction in pipeline inventory of 37 percent.

Supply Chain Management in Formal Education

Each researcher defines SCM differently. David Simchi-Levi, a leading SCM professor from MIT, developed the structure of supply chain course in the book “Designing and Managing the Supply Chain” from his extensive experiences in teaching, numerous consulting projects and the development of a supply chain decision support system as below,

1) Logistics Network Design: how to choose facility location quantitatively and qualitatively

2) Inventory Management: various techniques used to develop the good forecasting models and how to determine the right inventory policies

3) Value of Information: how coordination in supply chain can help to reduce lead-time and improve service to customer

4) Distribution Strategies: all aspects of material flows through the supply chain including issues in transportation and warehousing such as vehicle routing, fleet management and material handling

5) Strategic Alliances: how to create a firmed relationship with suppliers and service providers

6) International Issues: examine how well each company operates in multiple countries

7) Product Design and Development: the method used to design the new products and how to introduce them to customers successfully

8) Customer Value: how to measure value to customer and make good proposition of good products and services

9) Information Technology: application of information technology such as ERP, EDI, e-commerce and supply chain analytics