The Differences Between Logistics, Operations and Supply Chain Management
Logistics, operations and supply chain management are similar, but different, roles. However, when asked to explain these differences, it can often be quite difficult to do so as the roles are so heavily intertwined. First, let's look at some industry definitions...
What is Supply Chain Management?
According to the Council of Supply Chain Management Professionals (CSCMP) the definition of supply chain management (SCM) is as follows:
Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.
What is Logistics Management?
The CSCMP then define logistics management as:
...part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements.
What is Operations Management?
The Business Directory definition of Operations Management is:
The design, execution, and control of operations that convert resources into desired goods and services and implement a company's business strategy.
What are the Differences (and Similarities)?
Operations management tends to be associated more with the production of goods as opposed to the movement of goods. However, some would say that operations management is the basis of both supply chain management (SCM) and logistics. As operations management is about turning inputs into outputs we can also include services in this and not confine ourselves purely to production. The inputs themselves can include anything from materials, equipment and technology to human resources including drivers and warehouse operatives.
There have been occasions where the terms logistics and SCM have been interchangeable. However, in my view, SCM is all-encompassing whereas logistics, as defined by The Business Directory, is more about the storage and movement of goods.
There are strong parallels between the skills required for effective operations management and those needed in both logistics and supply chain management. Excellent organizational skills are crucial in improving efficiency and driving productivity as an operations manager.
Improved productivity is required in freight vehicle operations and warehouse processes and all along the supply chain in order to ensure the profitability of a company.
According to Tim Dhoull, “an operations manager needs to understand the series of processes within a company in order to get them to flow seamlessly, and in this sense, the role is directly related to supply chain management. The coordination involved in setting up these processes in practice represents logistics; the combination of understanding and coordinating the work of a company are therefore central to a successful operations manager”.
Although there are differences, these terms and roles are very much inter-related and in order to be profitable in this competitive age, companies must have an experienced and effective team of supply chain, logistics and operations managers.