What is the Supply Chain?
The supply chain refers to the set of organizations, people, activities, and information that convert primary raw materials into a finished product. It also includes the finished product flow from the supplier to the end consumer.
The Supply Chain is the management of three streams: material, financial, and informational. Supply Chains can be simple or complex. However, the path from the supplier to the consumer is thorny and long.
The Supply Chain is only as strong as the weakest link in it. Therefore, managing the Supply Chain concentrates on synchronizing the Supply Chain, ensuring sufficient throughput, and providing the critical factors for competitiveness. Any chain also includes several organizations that interact with each other, such as:
- Provider of raw materials
- Provider of processed materials
- End buyer
What is Supply Chain Management?
When we talk about supply chain management, we are referring to a set of methods and practices aimed at integrating the efforts of all supply chain participants to meet customer demand in the most efficient way possible. This complex process has two primary goals:
It delivers a defined level of customer service. It means that the output of the supply chain must meet customer expectations in terms of timing, volume, and quality of products or services delivered. It is crucial to create cost efficiencies in the process.
It optimizes costs throughout the supply chain. However, it is necessary to ensure a decent income for each link in the chain. Therefore, logistics is one of the elements of supply chain management.
What is Logistics?
Logistics is the science of managing material and associated information and financial flows in supply chains. In addition, logistics is the art of controlling traffic. It is one of the primary disciplines in the ecosystem of modern management of manufacturing, distribution, supply chain, and other business operations in general.
Logistics and Supply Chain are complex fields without which no business is possible. The logistics approach sees management not from the perspective of a single company but the perspective of an ecosystem of business. It considers the comprehensive application of planning, analysis, and decision-making tools. In addition, the logistics approach integrates digital technologies and software solutions in action.
There are seven essential criteria for logistics:
The main task of logistics is to organize the enterprise’s most effective activities and find the most effective and optimal management decisions using software solutions for logistics, as they can help the company gain more economic effect.
Why do people confuse these concepts?
Many people often confuse business Supply Chain Management with Logistics Management. However, logistics is only part of the Supply Chain. Together with it, it includes the purchase of raw materials, production, and the organization of delivery – the entire path of the product from its inception to the final consumer.
In the modern understanding, Supply Chain Management seems to be a more global category than Logistics. It is because the SCM model considers business processes within the organization and its suppliers and customers, which are linked into a single chain.
Logistics and Supply Chain should not be confused. The first, for example, determines how to deliver goods by transport, while the latter determines how many trucks need to go out in total to deliver the goods.
Digital Technology in Industry
Is it necessary to implement information technology in Logistics and Supply Chain Management?
Modern technologies make it possible to increase the efficiency of cargo delivery due to quick access to information about the subjects (buyer, carrier, terminal) and objects (goods and services) of delivery. The process of implementation of information and computer technologies today is necessary and inevitable. The industry is rapidly evolving due to software products of different types. Thanks to the collection and processing of vast amounts of data, automation, forecasts, and acceleration of information exchange, information technologies have become one of the leading logistics and distribution transparency tools. Let’s see what IT solutions are helpful in modern logistics.
Enterprise Resource Planning literally means resource planning. Such complex component systems offer companies advanced multilevel data distribution for rapid business performance management, a managed multi-cloud environment, travel expense accounting, accounting, and payment in a single cloud and mobile system, improving company expense management through automatic processing of reports.
Transportation Management System provides comprehensive automation of all logistics business processes. When a company needs to solve transport problems, such a system will help create chains of transportation, for example, by different modes of transport, automate the formation of processes in conjunction with various departments of the company, etc.
The warehouse management system is designed to optimize logistics processes, distribution, and supply chain. It allows companies to manage logistics processes and adapt to market conditions, automates warehouse operations, increases its throughput, optimizes the use of space, and speeds up warehouse operations. In addition, managers can monitor and improve personnel performance using the system, keep track of their fleet, and analyze deviations.
It is a specialized system that is designed for tracking and controlling the state of any moving objects. It can provide monitoring of numerous parameters (driving speed, fuel level, temperature, etc.) The system helps track employees’ activity and optimize their working time. It makes regular data analysis based on the notification system.
Customer Relationship Management Helps transport company managers monitor managers’ effectiveness and their customer interaction.
There has been a fundamental change in how business has been conducted over the years — due to technological improvements resulting in the development of all key business areas. Supply Chain Management and Logistics have likewise improved compared to the past.