Supply Chain Management (SCM) and Logistics Management (LM) are terms often used interchangeably. Discuss. - PowerPoint PPT Presentation

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Supply Chain Management (SCM) and Logistics Management (LM) are terms often used interchangeably. Discuss.


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Title: Supply Chain Management (SCM) and Logistics Management (LM) are terms often used interchangeably. Discuss.

Supply Chain Management (SCM) and Logistics
Management (LM) are terms often used
interchangeably. Discuss.
  • Presented by
  • Animesh Verma
  • 074003

Brief over view
  • In 1986 the council of logistics management
    (CLM), the leading edge professional organization
    with a current member ship of over 13,000 defined
    logistics management as
  • The process of planning, implementing, and
    controlling the efficient, cost-effective flow
    and storage of goods, services, and related
    information, from point of origin to point of
    consumption, for the purpose of conforming to
    customer requirements.
  • Components of an Integrated Logistics System
  • Physical Supply links suppliers to operations
  • Internal Operations manages in-process material
  • Physical Distribution links operations process
    to customers

Entry of the SCM
  • From some of the statements it appears that SCM
    is logistics taken across inter organizational
  • A philosophy that describes how organizations
    should manage their supply chains to achieve
    strategic advantage
  • The objective is to synchronize requirements of
    the final customer with the flow of materials and
    information along the supply chain. The goal is
    to eliminate variability and reach a balance
    between high customer service and low cost

Why the Confusion?
  • Confusion over the terms supply chain and
    logistics management has grown over the last
  • Research would indicate that today the two terns
    are often used interchangeably, while others feel
    strongly that there are distinct differences.
  • The combination of these viewpoints has led to
    the nebulous grey area where the global transport
    industry, among others, often finds itself today.

SCM and LM Together Forever
  • The bottom line is terms supply chain and
    logistics management are inextricably
  • While different enough to be recognized as
    individual terms or processes, the two are so
    tightly interwoven that they should not be
    considered separately.
  • Logistics and Supply Chain functions can and do
    frequently overlap.
  • So what are those different enough and those
    intertwined threads ?

Viewpoints over SCM and LM
  • Logistics has a narrower focus on activities
    involving product distribution and the strategic
    coordination of flows between marketing and
  • In the case of the global transport industry this
    would translate into the relationship between
    transportation and distribution.
  • While focus of supply chain, on the other hand,
    additionally encompasses
  • manufacturing,
  • purchasing and
  • Procurement
  • which by their very nature enhance the focus by
    including third party suppliers, manufacturers
    and retailers. 

Is this sufficient??
  • Even with these differences it is clear that
    logistics areas often cut across supply chain
    functions and vice versa.
  • But do really VICE VERSA???
  • To get into a more clear image of this complex
    interconnection, definitions of SCM and LM might
    clear the in depth interconnection.

Defining Supply Chain Management
  • Complexity and structure of supply chains vary
    depending on the industry and the organizations
  • In a nutshell it can be said that supply chain
    management encompasses the entire process from
    raw materials to the final customer.
  • Effective SCM involves oversight and management
    of suppliers, buyers, vendors, customers, and any
    others on whom the organization depends on to
    deliver a product or service.

Still defining SCM
  • As consumer expectations around service speed and
    quality, cost, and choice continue to rise, an
    organization will compete to try and meet
    consumer demand.
  • Successful SCM organizes the process to make this
    happen in a way that also keeps costs low while
    turning a profit.
  • Competitive pressures are intense in the global
    transport world, and SCM has had to keep up.
    Technology has evolved to expedite communications
    as well the flow of information. 
  • On board computers and GPS systems for vessels
    and vehicles, and electronic transmissions for
    orders and shipping information are just two
    examples of technologies that have raised the
    competitive bar and impacted SCM.

Three Levels of SCM Decision Making
  • SCM processes and technology work to ensure the
    supply chain is operating efficiently at the
    lowest cost with optimum customer satisfaction.  
  • To this end, decisions are made at three distinct
  • Strategic At the strategic level, organizations
    focus on high level decisions that impact the
    entire organization.  Decisions often revolve
    around manufacturing site size and/or location,
    supplier partnerships, sales markets, or the
    products or services to be manufactured or

SCM level contd
  • Once we are through with strategy the upcoming
    levels are
  • Tactical Tactical level decision making focuses
    on measures to generate cost benefits like
    adopting best practices, or creating a purchasing
    strategy with selected suppliers.
  • Operational Decisions at this level are made on
    a daily basis and impact how products/services
    move through the supply chain.  Examples include
    production schedule changes or warehouse product

Defining Logistics Management
  • Logistics Management can be defined in plain
    speak as the movement of products from beginning
    to end, and encompasses the activities involved
    along the way. 
  • This includes the planning, implementing and
    control of the flow (both forward and backward)
    and storage of goods, services, and related
    information between the point of origin and the
    point of consumption to meet customer
  • Logistics management begins with the creation of
    strategies to maintain the most cost effective
    service levels.
  • As supply chains continue to change and evolve
    with regards to specific product lines to impact
    service levels, customer and market segments, so
    do the logistics strategies.

Three Levels of LM Decision Making
  • To develop a successful logistics management
    strategy decisions must be made on three distinct
  • Strategic  Any successful strategy requires a
    review of how logistics management contributes to
    the organizations high level SCM objectives.
  • Structural The logistics strategy should examine
    the structural issues of the logistics
    organization, such as the optimum number of
    warehouses and distribution centers, or what
    products should be produced at a specific
    manufacturing plant.
  • Implementation When deciding how to implement
    logistics management strategies company-wide,
    plans for an information system, new policy and
    procedure implementations, and a change
    management plan must be considered.

SCM Vs. Logistics
  • Logistics has metamorphosed into the concept of
    Supply Chain Management (SCM), which in turn has
    come to implicate every element of the
    Value-Added Chain.
  • Going backward, or upstream, this means channel
    logistics encompasses not only inventories of
    finished goods but also work in process (WIP) and
    raw materials.
  • Indeed, SCM at its fullest goes back not only to
    the factory floor but also to the suppliers of
    the suppliers of the suppliers.
  • Logistics is the management of the flow of
    physical materials.
  • In the context of marketing channels, physical
    distribution and logistics have traditionally
    been used interchangeably, with the understanding
    that only finished goods are part of distribution
    and the proper concern of a marketing channel
  • This, and many other ideas about channel
    logistics, has changed radically since the 1980s.

Supply Chain for Milk Products
The Case for SCM
  • If one studies the term Supply Chain Management
    from a historical perspective, it would appear
    SCM has become the more commonly used term,
    particularly with new and old industry
    associations alike including or changing their
    name to include the words supply chain.
  • To add fuel to the fire that SCM is the brighter
    star to that of logistics, Ken Ackerman, a noted
    logistics writer, has gone as far as to question
    the relationship between the growing popularity
    of supply chain concepts and logistics.  He
    challenged the differences between the two and
    even questioned if it was time for the former
    (supply chain management) to replace the latter
  • Companies increasingly rely on SCM as a key
    competitive weapon.  Impressive results,
    including dramatic reductions in cycle time and
    accelerated cash flows, have been noted as a
    result of effective supply chain management.

The Case for Logistics
  • Many global transport organization activities
    reside under the logistics management umbrella,
    including warehousing, inventory management,
    private (i.e., in-house truck fleets) and
    purchased transportation such as air, water,
    highway or rail.
  • Logistics Management is an increasingly important
    part of competitive positioning from the
    perspective of the global transport industry.  To
    stay competitive, exporters must make the right
    amount of product and services available in the
    right place at the right time.

What we require LM or SCM???
  • Organizations Require Both Logistics and SCM to
  • Logistics management is concerned with the
    movement of goods and services from suppler to
    consumer.  SCM shares this concern, but
    additionally is responsible for the flow of
    information and funds from supplier to consumer.
  • Perhaps this is why many in the industry believe
    that as long as there is a matrix-type
    relationship between the two, it should be up to
    the individual organization to decide what
    emphasis works best to meet its needs.

The Importance of Logistics in Channels
Inventory Management in Marketing
Channels Inventory Holding Costs Reducing
Inventory Pseudo Inventory Reduction Real
Inventory Reduction
Logistics and Supply Chain Management
Supply Chain Management Efficient Consumer
Response Changes in Merchandising Category
Physical Efficiency versus Market Responsiveness
Critical Supply Chain Elements
Fulfilment and Transportation
The Verdict
  • The verdict is clear.
  • Given common concerns between the two, as well as
    the clear overlaps seen time and time again as
    logistics and SCM cross paths, it should be
    expected that SCM and logistics will both remain
    intrinsically intertwined and essential to
    organization success.
  • So, analyse your need and problem and give
    preference to two
  • But still for final success use BOTH!

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