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

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

• Presented by
• Animesh Verma
• 074003

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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
  process
• Internal Operations manages in-process material
  flow
• Physical Distribution links operations process
  to customers

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Entry of the SCM

• From some of the statements it appears that SCM
  is logistics taken across inter organizational
  boundaries
• 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

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Why the Confusion?

• Confusion over the terms supply chain and
  logistics management has grown over the last
  decade.
• 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.

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SCM and LM Together Forever

• The bottom line is terms supply chain and
  logistics management are inextricably
  intertwined.
• 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 ?

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Viewpoints over SCM and LM

• Logistics has a narrower focus on activities
  involving product distribution and the strategic
  coordination of flows between marketing and
  production. 
• 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. 

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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.

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Defining Supply Chain Management

• Complexity and structure of supply chains vary
  depending on the industry and the organizations
  size,
• 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.

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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.

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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
  levels
• 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
  delivered.

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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
  movement.

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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
  requirements.
• 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.

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Three Levels of LM Decision Making

• To develop a successful logistics management
  strategy decisions must be made on three distinct
  levels
• 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.

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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
  manager.
• This, and many other ideas about channel
  logistics, has changed radically since the 1980s.

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Supply Chain for Milk Products
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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
  (logistics).
• 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.

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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.

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What we require LM or SCM???

• Organizations Require Both Logistics and SCM to
  Succeed
• 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.

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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
Management
Physical Efficiency versus Market Responsiveness
Critical Supply Chain Elements
Fulfilment and Transportation
Documentation
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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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Questions???