Our next question is ‘How is SCM (Supply Chain Management) different from logistics?’
A simple role play would help us spot the difference.
Imagine you are a smartphone manufacturer. Your goal would be to make and then sell smartphones to interested customers.
To sell, you need to produce, to produce you need raw materials and a place to produce. The factory then makes the phone. You then find the means to get it into the hands of your customers.
What is Logistic’s usual way of looking at the example above? It would identify the best way to move raw materials to the factory. It would then source for the best way to transport the phones to customers. Its central point of view focuses on transportation and the details of achieving it at best cost. It focuses on Operations-how to get it done?
The SCM perspective is different. It looks not only at the transportation but also lines of supply and lines of demand. It seeks to identify risk and success factors now and in the future. Its focus is to make business grow and to keep succeeding. It focuses on Strategy-why get it done like this?
So one main difference becomes obvious between Logistics and SCM.
Logistics focuses on efficient movement with cost as a driver. SCM focuses on effective business with cooperation as a driver.
If not already visible. One focuses on cheapest price for the job. The other focuses on creating value for everyone without sacrificing cost. This may not be easy but it is the way forward.
A simpler way to summarize the difference would be Logistics focuses on efficient movement. SCM focuses on putting it all together (logistics included).
Our clients often approach us with logistics issues they are facing. In working with them it usually becomes clear the problem is one of managing Supply Chain. It is more often now about how to create value rather than how to get the best price. The goal usually becomes more of How do I make things come together better?
If creating value is what’s missing for you. Or if this article has given you fresh insights or you need help. Email us.
Our next topic is PLs and what it all means to you
If you had not read about our article on Logistics, please click here.