What Is the Difference between Supply Chain and Logistics?
The terms "supply chain" and "logistics" are often used interchangeably within the transportation industry. They are, however, distinct areas, each involving specific processes, duties and responsibilities. The confusion in distinguishing between supply chain and logistics might stem from the fact that logistics is considered by many people to be a subcategory of supply chain management. The main difference between supply chain and logistics is that logistics is merely a specialized part of the entire supply chain process.
Generally, logistics focuses on the actual transportation and storage of goods. It deals with things such as inbound and outbound freight, reverse shipping, communications during transit, storage and warehousing. Logistics also deals with the delivery of goods and freight, coordination among third-party carriers, fleet management and other activities directly related to the actual transportation of goods from one point to another. Depending on the needs of a particular company, logistics management might also encompass manufacture and packaging, price negotiation for different aspects of transportation, third-party integration and procurement, technology, communications and customer service.
For the most part, the supply chain encompasses a bigger picture. Supply chain management is the umbrella that covers all aspects of the sourcing and procurement of goods. Basically, supply chain management forms and manages the business-to-business links that allow for the ultimate sale of goods to consumers. Logistics, basically getting the freight from one place to the other, is a function that falls under the wide umbrella of supply chain management, but is only one part of the entire process.
Supply chain management is a broad, integrating process that entails many other aspects aside from logistics. Those aspects include finding and obtaining the goods to sell, negotiating pricing, manufacturing, storage, packaging and inventory control. Supply chain management also includes distribution, cost allocation and control, third-party negotiation and collaboration as well as management of supply and demand. The broad territory covered by supply chain management is why some of these processes have splintered off into another subcategory of supply chain management known as demand planning, which, like logistics, can be viewed as a separate but related area of expertise.
The details and precise definitions for both the process of supply chain and logistics will vary from company to company and will overlap to certain degrees. By necessity, many of the duties and responsibilities inuring to logistics management will cross over into supply chain management, and vice versa. Depending on the size and specialization of a particular company, the two areas might be lumped together as one, and the same individual might manage both the supply chain and logistics. Any person seeking to become involved in either supply chain management or logistics management within a company should ensure that the parameters of his or her responsibilities are clearly defined.
Increased wages in CIVETS (China, India, Vietnam, Ethiopia, Thailand and South Korea) over the past 10-15 years have seen many companies which originally outsourced many jobs begin to see reduced profits. Outsourcing is quickly becoming uneconomical.
The complexity of supply chains mean that each component for a product covers huge distances. The increase in the price of oil has caused strain on shipping companies. If these companies put their prices up, the price for consumers is increased.
Large companies deal with supply chains which are so complex they can lose money very quickly. If there is 5% returns on a product then the company can see a loss on 50% in its profits.
The increase in consumer customization and decrease in time causes large problems for companies with little or no control over the entire SC.
For example, some products purchased online are now able to be delivered the same day. The time critical consumer now almost demands this service. Therefore a company dealing with only logistics (the movement and transportation of goods) cannot be flexible enough to deal with large changes to price and sourcing of materials.
There are many smaller college and universities nationwide that now offer an associate degree in logistics management. Most programs are currently a 2 year degree of approximately 60 credit hours. Before this degree was created, typically people with accounting or business economics degrees with experience in shipping were tapped to serve in these positions.
What is the college degree best suits the position of logistics manager?
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