Logistics and Supply Chain Management: What’s the Difference?

Understanding logistics and supply chain management is crucial for aspiring business leaders because of their contributions to a company's success. These two interrelated disciplines are vital in ensuring that businesses run smoothly and efficiently. You can gain a strategic advantage by grasping their differences and how they complement each other. Let’s break down what makes logistics and supply chain management distinct yet interconnected components of a successful business operation.

Managing logistics in business involves effectively planning, implementing, and controlling the movement and storage of goods, services, and information. It encompasses a range of activities, from sourcing raw materials to delivering finished products to customers. Essential functions include warehousing, inventory management, transportation, and order fulfillment.

Warehousing involves storing goods until they are needed for production or distribution. Efficient warehousing strategies help businesses reduce overhead costs and improve supply chain responsiveness.

This term refers to the processes and equipment used to pack, load, and move goods during storage and transportation.

Transportation is the backbone of logistics. It includes selecting appropriate transport modes— air, sea, rail, or road—to move goods efficiently. Decisions in transportation logistics can significantly impact delivery times and costs. Companies often leverage technology and data analytics to optimize routes and reduce transportation expenses.

The role of logistics extends beyond just moving goods within the supply chain. It also involves order fulfillment, which includes coordinating order processing, picking, packing, and shipping.

The Council of Supply Chain Managers states that logistics includes "effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption to meet customers' requirements."¹

This is a good point to clarify three basic terms about logistics:²

• Inbound logistics focuses on getting materials from suppliers to the business and can be conceived of as covering all steps between purchasing and inventory control in the warehouse
• Outbound logistics refers to delivering products to the customer. You can think of it as beginning with order processing and ending with delivery
• Reverse logistics covers the movement of goods from the customer back to the business in situations including product returns, recalls, repairs, and end-of-life product management

Logistics managers seek to ensure that the right products reach the right place at the right time and that the processes are as efficient and economical as possible. Logistics management professionals handle various activities, including inbound and outbound transportation, fleet operations, warehousing, and materials handling. A logistics manager may be responsible for order fulfillment, logistics network design, inventory control, and supply and demand planning. Additionally, they may work with third-party logistics services and oversee sourcing, production planning, packaging, and customer service.¹

Effective logistics management ensures customer orders are fulfilled accurately and promptly, boosting customer satisfaction, loyalty, and the company's bottom line. By optimizing logistics operations, companies can enhance operational efficiency, minimize costs, improve overall service delivery, and create a competitive advantage.

Supply Chain Management (SCM) is the coordination and management of a network of interconnected businesses that provide products and services to end-users. The scope of supply chain management is broad, encompassing everything from sourcing raw materials to delivering finished goods. Supply chain management integrates various processes, including procurement, production, distribution, and logistics, ensuring a seamless flow of information, products, and services.

Procurement involves acquiring the raw materials and components needed for production. The procurement manager evaluates suppliers, negotiates contracts, and manages relationships to ensure a steady supply of high-quality inputs while striving to realize cost savings. This process is crucial for maintaining production schedules and meeting customer demands.

Production encompasses the operations involved in transforming raw materials into finished products. Effective supply chain management ensures that production processes are efficient, cost-effective, and aligned with demand forecasts. Businesses can minimize waste and improve throughput by optimizing production schedules and resources.

Distribution refers to the strategies and activities required to deliver products to end-users, including storage warehousing, transportation, and inventory management. A distribution center manager strives to develop networks to efficiently store and deliver products. This efficiency creates a competitive edge for the business by reducing lead times and meeting customer expectations.

A supply chain manager typically employs a suite of methods and tools to enhance supply chain responsiveness and adaptability. Information exchange is vital for coordinating supply chain processes and collaboration among operational units. That exchange is facilitated by the technology that helps synchronize supply chain activities. Real-time data and analytics enable businesses to make informed decisions, improving visibility and coordination across the supply chain.³

The relationship between logistics and supply chain management can be compared to how various systems work within the human body. Think of SCM as the body—a complex network of functions working harmoniously to maintain overall health. In this analogy, logistics serves as the circulatory system, delivering vital nutrients and oxygen to keep the body functioning smoothly.

Supply chain management embodies a broad scope of responsibilities, coordinating both internal operations and the work of suppliers and vendors. Just as the human body relies on various interrelated organs and systems to function, SCM integrates multiple processes, from procurement and production to distribution and logistics. It ensures a seamless flow of information, products, and services across interconnected businesses. This holistic approach aims to enhance agility, efficiency, and collaboration, ultimately driving organizational success.

On the other hand, logistics management focuses on the movement and storage of goods within the supply chain. Like the circulatory system that ensures essential nutrients reach every part of the body, logistics coordinates activities such as transportation, warehousing, inventory management, and order fulfillment. It emphasizes efficiency in moving goods from one point to another, ensuring timely deliveries and optimal storage conditions.

The primary objective of supply chain management is to create integrated, high-performing supply chain networks that are responsive to market needs. This includes managing supplier relationships, optimizing production schedules, and ensuring effective distribution strategies. SCM professionals seek to meet customer demands efficiently by improving the overall performance of their supply chains.

Logistics management, in contrast, prioritizes operational objectives like reducing transportation costs, improving delivery times, and maintaining accurate inventory levels. Its goal is to enhance the efficiency of the processes that move and store products within the overall supply chain.

Supply chain management functions as an integrative framework. It connects various business processes, ensuring synchronization and collaboration across different departments. Similar to the way the human nervous system coordinates actions within the human body, supply chain management uses technology and data analytics to provide real-time visibility and enhance decision-making.

While Logistics Management is a subset of SCM, its role is critical. It supports the operational backbone, focusing on the day-to-day activities that keep the supply chain running smoothly. Like how the heart and blood vessels ensure the body's cells receive the nutrients they need, logistics management strives to deliver products accurately, on time, and in good condition.

The synergy between logistics and supply chain management (SCM) is essential for optimizing business operations. These interdependent functions work together to ensure efficient and timely delivery of products, enhancing customer satisfaction and creating competitive advantages for the business.

Inventory management requires strong collaboration between supply chain and logistics managers. Supply chain managers handle strategic planning, demand forecasting, and supplier relationships, ensuring a robust sourcing plan. Logistics managers focus on warehousing, inventory control systems, and order fulfillment. Together, they balance supply and demand, preventing overstock and stockouts.

Order fulfillment is another area of synergy. Supply chain managers optimize the supply chain and ensure timely production and procurement. Logistics managers coordinate the physical movement of goods, including picking, packing, and shipping. This teamwork streamlines order processing and improves customer satisfaction.

Efficient distribution networks also highlight the partnership between logistics and SCM. Supply chain managers design strategic distribution plans, while logistics managers handle day-to-day transportation and warehousing operations. This collaboration ensures swift product movement and timely delivery to customers. Lean supply strategies, in particular, require a tight partnership between logistics and supply chain managers.

Emerging technologies and trends are reshaping the future of logistics and supply chain management. Key advancements include artificial intelligence (AI), the Internet of Things (IoT), and machine learning. These technologies enhance visibility, efficiency, and decision-making capabilities. However, they also introduce vulnerabilities to cyber attacks, which need robust defenses. Data governance is essential to harnessing the benefits of integrated systems. Additionally, there is a growing global focus on sustainable operations, which also relies on data accuracy and standardization.⁴

Because supply chain management is central to company operations in any industry, it is the focus of a core course in Seattle University's online MBA program. The values-centered online MBA offers convenient asynchronous course delivery to help working professionals master the cross-functional skills to succeed in today's dynamic business environment. Courses for the online MBA span operations and logistics, marketing, accounting and financial management, and more. Leadership challenges threaded through the curriculum help you develop your leadership framework and professional network. Schedule a call with an admissions outreach advisor to learn more or get started on your path to logistics and supply chain management excellence.