Confused between supply chain management and Logistics? Here’s how these two terms are different.
Logistics and supply chain aren't the same things. But logistics is a part of supply chain and that means whoever manages your supply chain will be responsible for managing freight forwarders, shipping companies, parcel delivery companies (like Fedex and UPS), customs brokers and third party logistics providers (3PL).
Logistics is the management of the movement of goods whereas supply chain management covers the many other areas we're discussing here. Supplier management is what most people perceive supply chain management to mean. And, truly, this is where a lot of supply chain managers spend their time. The arena of supplier management includes;
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the cost of goods negotiations,
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on-time delivery management,
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quality audits and management,
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new product development — to name a few areas of focus.
Your supply chain team will work with your suppliers' customer service teams, engineering teams, quality teams and even supply chain teams. Just like your customers probably measure your performance, it's important that you and your suppliers work together to determine the right metrics to measure their performance. On-time delivery is the most common metric that's measured, but make sure that you and your suppliers understand the precise definition of on-time delivery that you'll be measuring.
On-time delivery isn't as black-and-white as some might think. There are original promised delivery dates that can (and often) change during an order's lifetime. So are you measuring on-time delivery performance against the original promise date or subsequent revised promise dates? Make sure you and your suppliers are aligned.
To find more about INCOterms for On-time delivery or delivery in general, read our previous blog, click here.
Also, are you measuring the dock date or the ship date? Oftentimes that will depend on the payment terms you've negotiated with your supplier. If your payment terms are FOB Plant, for instance, that means you're responsible for the shipping method once the product leaves your supplier's plant.In that case, your on-time delivery metric would likely be based on the ship date.However, if your payment terms are CIF, i.e. your supplier pays for the cost, insurance and freight to deliver it to you — then your on-time metrics would likely be based on the date the shipment arrives at your dock.
Logistics providers should be managed in the same way that you manage your suppliers. Costs and contracts can be negotiated. You can source freight forwarders the same way you would source suppliers of the products you need. Shipping and warehousing costs can be one of the largest expenses in your supply chain and it's critical that your logistics providers are measured and managed to control those costs.
At the end of the day, supply chain management is optimized when you are delivering what your customers want, when they want it. This makes Logistics and supply chain management as two distinct terms, both co-dependant on one another.