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Difference between Logistics and Supply Chain

Updated: May 20, 2023


Logistics management: It focuses on the co-ordination of functional activities towards a common goal. Logistics is the art and science of moving things from one point to another, and storing them along the way. Efficient logistics makes global economies possible, lowering the cost of living for people around the globe. A supermarket in London may sell vegetables and fruits grown in Africa, whilst an apparel retailer in North America might sell products sourced from many countries in North Africa and Asia.

Supply Chain Management (SCM): extending the logistics concept outside an organisation’s internal boundaries. Logistics management has become part of supply chain management that ‘plans, implements, and controls the efficient, effective forward and reverse flows and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements’ (Fawcett et al., 2007, p. 153).

Illustration showing the difference between logistics and supply chain.

Supply Chain vs Logistics Illustration

What is involved?

The key traditional supply chain activities are procurement, production and distribution, with early approaches witnessing opportunities for coordination of operations between purchasing and production activities or production and distribution activities.

At the heart of every organisation are the logistics operations that create and deliver products and services. These operations require inputs in

order to produce the right output in order to be delivered on time, in the right quality and at the right price. Essentially, logistics operations is the fibre and lifeline that enable an organisation to survive and thrive within it's supply chain environment.


Supply Chain Management

Supply chain comprises all activities associated with the flow and transformation of goods, from raw material stage through to the final consumer (Handfield & Nichols, 1999); in other words, it is a sequence of events intended to satisfy a customer or end user.

It can include procurement, manufacture, distribution and waste disposal together with the associated transportations, warehousing, inventory control, materials

handling, order processing, distribution, recycling, information processing to name some of the elements.

Supply Chain Management (SCM) is receiving more attention as the alternative to achieving competitive advantage through cost-reduction and improved customer service levels. So what does supply chain management involve?

SCM is about managing and coordinating the information, materials and money flows of the supply chain; that is, the whole process from the time that a need is identified to the time that this need is satisfied. This includes all the activities of the chain, from source through to manufacturing, distribution, and up to final consumption. It also includes the return of unwanted and packaging materials.

Key Difference between Logistics and Supply Chain

1. Logistics is the effecient movement and storage of goods and services from Point A to Point B.

Supply Chain is the effective coordination of information, materials and money from source to final consumption.

2. Logistics is concerned with an single firm's delivery of goods to the customer in the right time, quality and price.

Supply Chain does not focus on a single firm but rather on a number of players in the process of satisfying customer needs and achieving competitive advantage.

3. Logistics is a small but important part of Supply Chain to achive customer satisfaction. Supply Chain encompesses many activities that also include logitics to satisfy it's end user.

Emergence of Supply Chain Thinking

Let us now look at some of the key management approaches for the last two decades which have led to supply chain thinking.

The supply chain concept has evolved since the middle of the 20th Century, with the following developments:

1950–1960s: Distribution broadly represented by haulage industries, with a focus on transport.

1960–1970s: Concept of Physical Distribution developed and the distribution activities were considered the ‘dark continent’ of operations therefore becoming a valid management area.

1980–1990s: The logistics concept in search of cost trade-offs, the search for cost competiveness continued with emphasis on reduction on stock levels, the use of ICT, and the growth of Third-Party logistics (3PLs) service providers.

1990–2000: Supply chain concept emerging from the need to plan and control all processes from sources through production to distribution to the final consumer. This called for a rethink of business processes, e.g. process re-engineering (BPR), so as to include operations of partners outside organisational boundaries, e.g. partnerships, alliances, etc.

2000–2010: Sustainability of operations has also become a contemporary management issue for logistics and supply chains due to pressures regarding efficient use of resources, global trade and other societal demands.

Content Copyright: CILT UK



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