Supply Chain Management Essay Example
Supply Chain Management
Logistics management and Supply Chain Management have materialized during the recent past as subjects of immense interest, as they have been used to influence the competitive advantage of firms globally. Above and beyond this, there still exist significant confusions and misconstructions concerning the difference between the two concepts. While the terms Supply Chain Management and Logistics Management interrelate, they stand for two different things. They do not have similar meaning in operation. Basing on this background, this essay argues that although the term supply chain management has been confused for being a synonym of logistics management, it is comparatively broader in scope. This paper demonstrates the difference between the terms ‘supply chain management’ and ‘logistics management,’ before discussing their strategic importance to a manufacturing firm.
Difference between ‘supply chain management’ and ‘logistics management
The term logistics management consists of processes involved in the oversight of the flow of commodities, information, or any other resources from the point of origin to the point of utilization to address the needs of consumers cost-efficiently. On the other hand, supply chain management is concerned with the coordination and integration of logistics management in and among firms (Harrison & Hoek 2008).
In view of these descriptions, it could be reasoned that logistics management entails the entire supply chain within a single enterprise, in this case the activities characterising movement of commodities from their places of origin to that of consumption. It is usually carried out at a local level in individual companies, and is explicitly centred on maximising the movement of these commodities across the total chain to satisfy customer demands (Chiu 1994). Logistics management, therefore, means overseeing the processes involved in integrating the flow and maintenance of commodities into and out of the organization. On the other hand, supply chain management describes coordinating and managing the supply chain activities (Chiu 1994). Put differently, logistics management essentially means managing and coordinating the designing and procedures involved in the physical flow of goods, labour, and informational resources required to ensure the flow of commodities in a way that can overcome space and time, as well as in order to conforming to customers demands (Harrison & Hoek 2008).
Likewise, supply chain management involves the set of activities concerned with integrating the relevant units within the organisation along the supply chain and coordinating the movement of information, commodities and human, as well as financial resources to satisfy the definitive customer demands. The objective is to enhance the competitiveness of the supply chain in its entirety (Mentzer et al. 2001).
From these descriptions, it is also clear that logistics management consists of a small segment of supply chain management concerned with managing the flow of commodities efficiently. The idea that supply chain management covers the planning, coordinating and managing processes concerned with souring and procuring, converting, as well as logistics management processes implies that supply chain management is wider in scope than logistics management, and that logistics management is a smaller component of supply chain management (Mentzer et al. 2001). Additionally, supply chain management comprises managing supply and demand of goods across firms rather than within firms as for the case of logistics management (Naslund & Williamson 2010).
Strategic importance of supply chain management and logistics management
Supply chain management and logistics management are strategically significant to a manufacturer, as they allow firms to reduce costs in their supply chain. According to Tan (2001), manufacturing increasingly perceive efficiency in their supply chain as essential for cost reduction. In addition, they view it as a critical source of competitive advantage that potentially drives the improvement of their performance in areas of generating profits, customer services, and effective resource utilisation, as effective supply chain management allows for effective collaboration in each specific chain entity among the companies, or within a single enterprise (Kampstra & Ashayeri 2008).
Supply chain management and logistics management also enable firms to match their competitive strategy and actual performance with the realities and goals of their total supply chain. As Pires and Ayres (2000) argue, for firms to remain competitive, they have to search for innovative solutions to significant supply chain management areas like logistics management, supply chain management, as well as distribution network design. One reason for this is because firms have to contend with diverse corporate challenges that influence their Supply Chain Management processes, including outsourcing. However, it is still significant for firms to acquire products and convey them to the customers fast, in response to customer demands. Within thin sense, ensuring faster product accessibility to the customers has a potential to increase the sales for a company. Similarly, companies with a reputation for faster and reliable delivery of products to the customers are likely to earn a reputation for reliability.
Supply chain management and logistics management are also strategically important for firms, as they increase customer satisfaction, as a result, increasing their competitive advantage. With effective supply chain management, it is possible to argue that it seeks to address the systematic integration of a firm’s business operations by managing the demand and productive chain while seeking to attend to the ultimate customer efficiently. According to Pires and Ayres (2000), companies need to leverage Supply chain management and logistics management to maximize the synergy among the elements of the demand chain to increase the value of the products, such as through customisation of products or ensuring a steady supply of goods in ways that match the market demand.
While the term supply chain management has been confused for being a synonym of logistics management, it is comparatively broader in scope. Supply chain management covers the planning, coordinating, and managing processes concerned with souring and procuring, converting, as well as logistics management processes involved in the oversight of the flow of commodities, information, or any other resources. This implies that supply chain management is wider in scope than logistics management, and that logistics management is a smaller component of supply chain management. Overall, supply chain management and logistics management are strategically significant to a manufacturer, as they allow firms to reduce costs in their supply chain. They also enable firms to match their competitive strategy and actual performance with the realities and goals of their total supply chain. In addition, they increase customer satisfaction, as a result increasing their competitive advantage.
Chiu, H 1994, «The integrated logistics management system: a framework and case study,» International Journal of Physical Distribution & Logistics Management, vol. 25 no. 6, pp. 4-22
Harrison, A & Hoek, R 2008, Logistics Management and Strategy: Competing through the supply chain, Prentice Hall, London
Kampstra, R & Ashayeri, J 2013, » Realities of supply chain collaboration,» The International Journal of Logistics Management, pp.1-12
Mentzer, J, DeWitt, W, Keebler, J, Min, S & Nix, N 2001, «Defining Supply Chain Management,» Journal Of Business Logistics, vol.22, no. 2, pp.3-14
Naslund, D & Williamson, S 2010, «What is Management in Supply Chain Management? — A Critical Review of Definitions, Frameworks and Terminology,» Journal of Management Policy and Practice vol. 11 no 4, pp.11-27
Pires, S & Ayres, A 2000, Strategic management of logistics and supply chain: a case of increasing and fostering the competitiveness of a TNC subsidiary in Brazil, viewed 15 March 2016, <http://www.abepro.org.br/biblioteca/enegep2000_i0281.pdf>
Raja, R & Ali, K 2006, Relationship between Supply Chain Management and Outsourcing, viewed 15 March 2016, <https://core.ac.uk/download/files/392/11777395.pdf>
Tan, K 2001, «A framework of supply chain management literature,» European Journal of Purchasing & Supply Management, 7, pp39-48
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