Logistics Terms What is the difference between logistics and SCM(Supply Chain Management)?

Logistics and Supply Chain Management (SCM) are closely interconnected and should be considered together for efficient supply chain operations.
Logistics focuses on the execution and operation of cargo movement, storage, and more. For example, transporting products from a factory to a warehouse, then delivering them to customers, as well as inventory storage, packaging, and return process, all fall under the primary scope of logistics.
On the other hand, SCM goes beyond mere physical movement, focusing on strategically integrating and coordinating the overall flow of the supply chain, including selecting suppliers, forecasting demand, planning production, optimizing inventory, and responding to customers. In other words, logistics is responsible for the operational functions as part of SCM, while SCM encompasses the entire process from supply to production, distribution, and sales, serving as an overarching concept that oversees the overall flow. The goal of SCM is to integrate the management of physical flow (products), information flow (data), and financial flow (payments), with logistics being one of the key execution bases for achieving this.

Definition of Logistics

Logistics is a concept that focuses on activities related to the physical movement of goods, such as transportation, warehouse management, and inventory management. It primarily aims to organize and efficiently carry out the movement and storage of goods to deliver them to customers. The essence of logistics lies in transporting and storing cargo to the desired location at the required time, with minimal cost and in optimal condition.

Logistics Role

• Transportation
  It moves products or materials from the manufacturing site → warehouse → sales location, utilizing various transportation modes (e.g., road transport, sea transport, air transport, rail transport). The main objectives are optimizing transportation routes, reducing transportation costs, and managing lead time (time required for delivery).
• Storage
  Safely store products and inventory for a certain period of time ― before, during, and after transportation ― while maintaining the quality of products.
• Warehouse Management
  Systematically manage the process of inbound→storage→picking→outbound within a warehouse. The goal is to manage locations, optimize picking (improving speed of an order process), and enhance inventory accuracy.
• Packaging
  Protect products from damage, contamination, and deterioration during transportation and enhance ease of handling. Eco-friendly packaging, customized packaging, and cost-effective packaging design are increasingly important.
• Loading & Unloading / Handling
  Loading and unloading products onto transportation vehicles (trucks, ships, airplanes, etc.). Minimize product damage and delays through fast and safe loading and unloading operations.
• Inventory Management
  Forecast market demand to maintain optimal inventory levels and prevent overstocking or stockouts. The key objectives are inventory turnover management and cost optimization.

Scope

The process includes planning and managing all the flows of materials, information, energy, and services required for a company to produce and deliver products or services to customers. It also encompasses the logistics scope of returning products by customers, recovering and recycling used products, and disposing of waste generated during production. Recently, its scope has expanded to include international transportation, customs clearance, global supply chain operations, as well as the establishment of information systems throughout the overall logistics process and eco-friendly logistics such as carbon emission reduction.

Definition of SCM

SCM stands for 'Supply Chain Management,' which integrates and optimizes the entire process from the procurement of raw materials to product production, distribution, and delivery to the final customer as a single flow. It performs activities such as planning, execution, and control to reduce costs and improve service levels, emphasizing strategic collaboration and cooperation between enterprises.

Role of SCM

• Procurement Management
  It establishes strategies required for supplier selection, contract management, and cost reduction by purchasing the necessary raw materials and parts at the optimal price at the right time.
• Production & Operations Management
  Based on demand forecasting, it determines production quantities and establishes schedules, and optimizes production resources (manpower, machines, processes).
• Demand Planning & Forecasting
  It analyzes the past data, market trends, and customer behavior through diversification to predict demand and then develops a plan accordingly.
• Supply Chain Collaboration & Relationship Management
  It builds a close collaboration with suppliers, logistics partners, and sales channels to ensure supply chain visibility
• Sustainability & Risk Management
  It reduces carbon emissions, builds an eco-friendly supply chain, and responds and establishes recovery plans in advance for supply chain risks (natural disasters, political instability, etc.).

Scope

It includes the entire process from demand forecasting, materials procurement, planning and operation of production, inventory and warehouse management, transportation and distribution, customer order processing, to return management. Moreover, it involves important tasks such as collaboration with partners and suppliers, supply chain risk management, securing sustainability based on ESG (Environmental, Social, Governance), and data-driven decision-making through IT systems. These tasks mainly aim to enhance the efficiency and visibility of the entire supply chain, realizing cost reduction and customer satisfaction at the same time.

Differences

Logistics and SCM may seem similar, but they have clear differences in scope and role. This is because while logistics is execution-oriented activities such as movement of products and storage, SCM is a strategic management that covers the entire supply chain.
To sharpen the competitive edge of companies in a rapidly changing market environment, it is necessary to adopt an SCM perspective that goes beyond logistics efficiency and views the entire supply chain in an integrated manner. Thus, going beyond a simple transport or warehouse operation, a growing number of logistics companies are providing comprehensive SCM services, from demand forecast, inventory optimization, to supply chain analysis.