While supply chain management and logistics stem from the same variables, the concepts differ. The concept of supply chain management is complex and came into existence more recently as improvements in business advanced. Supply chain management links multiple processes to achieve an overall competitive advantage whereas, logistics is part of supply chain cycle referring to the movement of goods, services and information.
What is Logistics?
Logistics is a part of supply chain management that moves products, services and information from one point to the other. Transportation is the key source of logistics that carry user products through cargo, truck, air and water while maintaining cost-efficiency.
Two Logistic Types
- Inbound logistic
- Outbound logistics
What is inbound logistics?
Inbound logistics deals with the supply side of transportation such as, the movement of goods like raw materials, finished goods or supplies from manufacturer to main distribution channel where it is then forwarded to warehouses or retailers. These consist of managing costs, inventory and transportation to ensure they will be delivered by a timely manner. This process is perhaps the most complex part of the logistics cycle as many components are involved to a final product. Procurement is a major component of inbound logistics as it is the process of sourcing and transporting material through a competitive advantage often involving size and nature of the product.
Process of Inbound logistics
- Buyer places order from manufacturer
- The supplier receives the order and produces the product
- Third Party Logistics involving shipment, distribution and storing of the item
- Inspection of product upon arrival at facility
What is Outbound Logistics?
Outbound logistics refers to the process of these goods being transported to its end user, final destination/consumers. This involves delivery of the correct product to the correct consumer while maintaining minimum costs. The primary objective of outbound is to ensure customer satisfaction which involves efficiency in both cost and service. Development of e-commerce has led to a competitive advantage between organizations as many compete to same-day delivery options and lower costs for consumers therefore value proposition is essential. A critical part of outbound is the distribution channel, by having links and a collaborative system allows efficiency in consumer response and service. Again, e-commerce has allowed optimization of these flows by having strong innovative technologies and acceleration of performance.
Steps to Outbound Logistics
- Completion of production to facility such as, warehouses
- Distribution centers allow distribution of products to retail
- Retailer stores the products for the final user
- Consumers are the end-users
What is Supply Chain Management
The previous describes the process of logistics which further stems into a broader, more complex topic of Supply Chain Management. The process of SCM involves everything within the flow of goods and services including the transformation of raw materials to the final product. The supply chain management must ensure consumer value and competitive advantage which means development of cost efficiency. Consider supply chain management as a network of manufacturers, wholesalers, and retailers. Supply chain management includes inbound logistics, manufacturing, and outbound logistics. SCM controls and links both inbound and outbound logistics therefore management of this chain is critical to the entire process. Examples of SCM initiatives include tighter control of internal variables, production and sales.
Why choose supply chain management?
The reason is quite simple, competitive advantage in cost efficiency and time. Although supply chain has existed for years, majority of organizations have recently noticed the value proposition of management of these resources. Management of supply chain allows coordination by the following: planning, sourcing, manufacturing, delivering and aftercare of final product.
Key Benefits of Supply Chain Management:
As demand increases, accuracy of data becomes essential. One can manage real-time data with accuracy to further predict demand better and respond accordingly.
Overhead costs are a major drawback within the business process as storing products for long periods of time can lead to unwanted higher costs. Similarly by managing supply chain one can ensure reduction of costs by optimizing warehouse space, improvement of productivity and a better inventory. In short Supply chain management allows one to select from a pool of competitive providers to select better alternatives.
Steps a manager takes to reduce the cost:
- Automate the warehouse system according to modern technology.
- If having an issue with logistics, change the logistics service provider
- Identifying unnecessary costs spent on supply
Efficiency is a major component of business success especially with consideration to e-commerce, many will compete above and beyond. Being able to have real-time data of resources allows organizations to have back-up plans for modifying procurement in order to prevent further delays. Smart, innovative solutions result higher efficiency levels.
Importance of Supply Chain Management In Logistics
The most critical and final step of logistics involves the final/end-user, the customer. Without customer satisfaction, consumers will not purchase or further recommend the business. So as a supply chain manager recognizes this, one can implement a business strategy that meets efficiency in all parts of the logistics process to ensure positive reputation for the organization.
A value proposition involves added value found in a product to the consumer. When a supply chain manager finds and recognizes value for a customer one can modify and produce a product within the inbound logistics process to meet those needs. This involves a reliable logistics provider to deliver on a timely basis as well as value added cost.
Having a good supply chain helps improve and increase revenue within the logistics process. Always avoiding late delivery and attracting more consumers provides added revenue and value to an organization. A company that provides better logistics services than its competitors will always attract more business therefore, having a competitive advantage is critical to business success.