In this article, we’ll be taking a look at the main differences between ‘Supply Chain Management (SCM)‘ and ‘Logistics‘.
Before we get into the discussion, let’s quickly cover the definitions.
What is supply chain management and what is logistics?
Logistics is all about the movement of goods from the point of origin to the point of consumption.
Supply chain management is the planning and management of activities including procurement, sourcing, conversion, and logistics management.
So, as you see, logistics is part of the supply chain process
Let’s briefly go over the activities of SCM.
Procurement: is the process of arranging raw materials for production.
Sourcing: is the selection of the right suppliers of the raw materials that are needed for production.
Conversion: is all about converting the raw materials into finished goods, ready to be used by the consumer.
And we’ll get into logistics management in a little bit.
Let’s look at a simple example.
For motor vehicle manufacturers:
Procurement: they need to look for raw materials that are required in order to manufacture motors vehicles. The raw materials may include things like steel, aluminium, copper, glass, etc.
Sourcing: they need to look for factories and suppliers that can provide the above raw materials.
Conversion: they need to put all the parts together to produce motor vehicles that are consumer-ready.
The raw materials required for motor vehicle production would be things like steel, aluminium, copper, glass, and many more materials.
Now, coming back to the logistics management side of things, it is the management of all of those functions.
Logistics management = management of order processing, warehousing, transportation, inventory management and control, VAS (labelling, packaging, etc.)