Logistics vs. Supply Chain – What Are the Differences?

We have talked extensively about logistics and supply chain in this Knowledge Base section of our website for some time now. Due to some questions from our readers, we have realized that many of you have believed for years that these are just synonym terms, to be used with equivalent meaning.

This is why we take this opportunity to make a clarification: logistics and supply chain are two different aspects of the activities of the company. In truth, logistics is a part of the supply chain, which involves more complex operations and activities. But probably a short description of how the two of them evolved will be useful.

A Brief History of Logistics

The first time when the word logistics was used to describe the activities involved in moving a large quantity of items over a long distance was during Emperor Napoleon’s times (the 19^th century). During his famous battle campaigns, the army had to be supplied with clothes, food, ammunition and heavy military equipment. Without careful planning an organizing, these items would never arrive on time in the place where they were needed – considering that we are talking of an era where motorized vehicles did not exist.

With the huge advancements brought by the industrial revolution, mass manufacturing and large scale distribution, businesses understood that they needed a set of principles for a clear management of their stocks, customer orders and deliveries. They used the same basic principles of Napoleon’s deployment plans for military supplies and developed them to fit their specific needs.

Enter Supply Chain

The 1980s came and brought with it tremendous changes to all the industries. Large corporations appeared and global trade took off like a rocket. Thanks to television, people became more aware of other nations, other cultures and they wanted to experience them through specific products. Suddenly, logistics was no longer enough to coordinate the circuit of merchandise across the globe. A new philosophy had to evolve – and it was called supply chain.

Supply chain is a holistic approach to manufacturing, storage, and distribution of goods. Its key principle is to look at the entire process as a whole, planning every stage in connection with the others. Logistics is one of the phases in a full circle supply chain.

Where Does Logistics Fit Into the Supply Chain?

A supply chain is created when a demand for a specific product appears and there is a manufacturer ready to satisfy it. Once the first order is placed and the first batch of products exits the manufacturing facility, the supply chain is set in motion.

Logistics are necessary as soon as the manufacturing process is complete. The products have to be placed in adequate packages and taken to a storage facility. A transportation company needs to be found to ship the products to the customers.

In parallel, the supply chain works by integrating customer orders with existing inventory lists in specialized ERP software suites. Orders are sent to the warehouse, and the IN/OUT flow of products is closely monitored.

Once the customers receive the products, their feedback is noted to be used for continuous product improvement and further research and development efforts. At the same time, vendors and suppliers are continuously sought and long term partnership relations are forged.

Wrapping Up the Supply Chain and Logistics Processes

Supply chain and logistics are neither the same thing, nor different (or competing) activities in global commerce and trade. While logistics is the older concept, it has now become a vital part of supply chain.

Thus, a successful logistics manager needs to be aware of the latest trends and best practices both of supply chain and of logistics. Only by integrating these principles with your specific business philosophy your company will be able to fulfill its clients’ demands and stay competitive.

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