Supply Chain Management vs. Logistics Management: The difference

There seems to be some confusion about the meaning of Supply Chain Management (SCM) and Logistics Management. Some people use both terms interchangeably to refer to the same activity, while others know there is a difference, but can’t quite explain it.

Someone posted the question "What is the difference between Supply Chain Management and Logistics Management" on a popular networking website recently and received many different answers. Some of which were:

1. SCM is Procurement, Production Scheduling, Inventory Management, Logistics, Warehouse Management and Demand Planning (and in the best of worlds customer service and order management)
2. Logistics is a subset of SCM and involves all of the activities required to move the product along any one point in the supply chain with a focus on meeting or exceeding the needs of that one specific "customer of the process".
3. Supply Chain is the broad group of fields. Logistics is probably the largest subset. Yes, Purchasing and even IT have described as Supply Chain activities.
4. I like the SCOR Model which simply reduces the "Supply Chain" to Plan-Buy-Make-Ship & Return. Additionally, there are 4 Supply Chains: Information, Documentation, Materials and Financial. Too often we do not focus on all of them.
5. This is the evolution of a profession. At first the term was Physical Distribution Management. It then evolved to Logistics which morphed into Supply Chain Management.
6. Supply Chain is cradle to the grave. Logistics is a generation in the SC life.

At Logistics Advice we like to use the following definitions:

Logistics Management is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers at the lowest cost possible.

Supply chain management involves coordinating and integrating Logistics Management (as described above) within and among companies that are part of the entire supply chain of a particular product.

We agree with the statement that Supply Chain Management involves all activities in the supply chain: procurement, manufacturing, inventory management, warehousing, distribution. All these activities need to be synchronized and optimized in order to bring down the costs of moving a product through the different stages of the supply chain. IT is an example of a tool to achieve that goal.

SCM must involve the entire supply chain - from processing raw materials to the end consumer - from the "cradle to the grave" - to be truly called "Supply Chain Management" where Logistics Management can be executed at a local level (manufacturer, distributor, etc.) as well.

First Internal Combustion Hybrid Lift Truck

Toyota Industries Corp (TICO) announced that it will launch the world's first internal combustion hybrid lift truck. Sales of the truck, know as the Geneo-Hybrid, will begin in Japan this December. Toyota's U.S. Material Handling subsidiary has yet to announce when the hybrid machine will be available in the U.S. market.

The lift truck is an 8,000 pound counterbalanced vehicle combining a 2.5 liter diesel engine with an electric motor and a nickel-metal hydride battery. The new hybrid will reportedly deliver the same operational performance as the conventional diesel-powered lift trucks while reducing fuel consumption and CO2 emissions by 50%.

The Geneo-Hybrid combines a Series Hybrid System for driving with a Parallel Hybrid System for load handling. With the Series Hybrid System, the lift truck's drive motor runs on electric energy from the engine-powered generator and battery. Load handling functions are powered by a Parallel Hybrid System with a hydraulic pump that receives mechanical energy from the diesel engine and generator, and electric energy from the battery. The nickel hydride battery is recharged by the engine's operation and does not require plug-in recharging.

This hybrid truck will reportedly provide both improved environmental performance and economic benefits for customers due to lower fuel costs.

To read more on the Geneo-Hybrid's news

Warehouse Logistics: How does the US compare to Europe

With a background in European warehouse logistics and plenty of experience in the same field on the US market, we are often asked to draw a comparison.

Working with companies in the United States, Logistics Advice, Inc. finds both similarities and differences. If you take a close look at warehouse operations on each side of the pond, you will find that European companies are generally better automated and organized. Obviously there are many US companies with top notch warehouse automation, automated picking systems, unmanned cranes, etc. But I would argue that this type of automation is more wide spread in Europe. It is not surprising that most material handling equipment is designed and manufactured by European (mainly German) companies.

The main reason for the difference is space, or better yet the lack of it! The shortage of space in most European countries has motivated people to find creative ways to use space efficiently. This does not simply mean to make aisles and forklift trucks narrower and buildings higher, it touches every single aspect of a warehouse operation and the company. From warehouse automation to inventory levels, from batch vs. single order picking to the implementation of procedures, it all needs to be optimized and synchronized. Even the way an order is processed by the Sales department has a big impact on the efficiency (or inefficiency) of a warehouse operation.

Even though many US companies are less confronted with the space issue, they should nevertheless actively work on identifying the same bottle-necks as if there was a lack of space. Once a company managed to cut back on the space it is using, it is not only able to profit from the empty space (by renting to another businesss or postponing their own move to a larger building), it will have created a smoother operation. It cut costs and therefore improved profits. The level of professionalism also increases the company's market share and results in additional revenue.

Anything that helps to increase warehouse productivity and inventory turnover will save space and costs. And analyzing the process and identifying those bottle necks definitely pays off!

Hiring a consultant during economic downturns is a smart business move

Savvy business owners know that if they are to survive our current economic crisis they must have a strategic advantage that puts them ahead of their competition.

Business owners can sometimes lose focus and even panic when they are faced with the possibility of having to lay off employees due to cash flow issues, while operational costs keep piling higher and higher. The decision to hire an outside consultant can often be a life saver for many companies. Outside consultants not only have the training and skills necessary to make suggestions that can have an instant positive impact, they also bring in a fresh set of eyes and ideas, which can ultimately be the strategic advantage that today’s businesses so desperately need.

It may seem illogical to hire someone who charges more per hour than a regular employee costs while your company deals with a difficult economy. But what if this person can make your operations more efficient, less costly, and save your company thousands of dollars each year?

This is the job of a consultant and there are many reasons to have a supply chain / logistics consultant take a look at your operations if there is money to save. And almost always there is! Even well organized companies miss great cost saving opportunities for many different reasons.

One advantage of having a highly experienced professional analyze your operations is that it provides you with fresh ideas. Improvements can often be accomplished by making small changes in the day to day operations. And a fresh approach is often needed to identify those potential savings.

Good advice from a professional is an investment and one that starts paying off immediately. In a downward economy it is important to cut costs wherever possible and that is exactly what a good consultant can do for your business.