What is a supply chain?

The supply chain is the entire process from the customer’s order to the delivery and payment of the product or service. Thus, the definition of supply chain includes the planning, execution and control of all activities related to the flow of materials and information from the purchase of raw materials to the final delivery of the product to the customer.

A supply chain is thus a multi-level connection, upstream and downstream, between different companies involved in value creation in the form of a network from the extraction of raw materials, through the refining stages to the final consumer.

Today’s supply chains have become extremely complex due to internationalization, increasing flow rates and changes in global consumer behavior.

Stages of the supply chain

esupply-supplychainThere are three main stages in the supply or value chain:

  1. Procurement: refers to where and when raw materials are obtained and supplied for the manufacture of products.
  2. Manufacturing: involves the processing of raw materials into finished products.
  3. Distribution: this stage involves activities that ensure that the product reaches its final destination. This is done by a network of distributors, warehouses, physical stores or online platforms (if it is an e-commerce company).

The supply chain is also called the value chain because products gain value as they are processed or refined. The warehouse plays an important role in this process.

Differences between supply chain and logistics

We have already looked at the definition of supply chain, but how does logistics relate to it? In general, supply chain refers to the entire value creation process of a product until it is sold. Logistics is just one part of the supply chain, which focuses on product storage, transportation and distribution.

In other words, logistics is the business unit that must ensure that the right product arrives at the right place at the right time, in the right quantity, at the right price, and in the right quality – always according to the terms previously agreed with the customer.

In the simple example of a furniture store, its logistics would focus on delivering the furniture ordered by the customer, and the furniture for presentation in the sales areas. These are kept in the warehouse until transport. The logistics manager of the warehouse designs the delivery routes for the furniture, taking into account any assembly tasks that may arise at the time of delivery to the end customer.

However, if we want to look at the whole supply chain in this example, we have to include all the finishing stages, from the original extraction of the wood, to its processing in the furniture factory into planks and individual components, and the subsequent delivery at the points of sale, to the final transport to the customer.

In the following table we see the differences between logistics and supply chain:

Supply Chain Management & Logistics Management Definition

  • Supply Chain Management : Is the strategic coordination of the entire value creation process of a product. It refers to the cooperation between manufacturers, suppliers, distributors, business partners and consumers.
  • Logistics Management : Is part of the supply chain and includes the management of the warehouse and internal and external transport flows from procurement to final delivery.

Supply Chain Management & Logistics Management Objectives

  • Supply chain management : To achieve maximum market competitiveness and optimize profits.
  • Logistics Management : To achieve customer satisfaction through perfect management of orders.

Companies involved Supply Chain Management & Logistics Management

  • Supply chain management : Usually several companies are involved in the same supply chain.
  • Logistics Management : Can be performed entirely by a single company.

Relationship between Supply Chain Management & Logistics Management

  • Supply chain management : Supply chain includes the entire process of adding value to a product.
  • Logistics Management : Logistics is a part of the supply chain.

Industries involved Supply Chain Management & Logistics Management

  • Supply Chain Management : Includes other areas such as: Product development, quality control, customer service, logistics operations, etc.
  • Logistics Management : Mainly warehouse, transportation and inventory management.

Trends in supply chain management 4.0

Supply chains are evolving towards a logistics system that is even faster, safer, more flexible, more personalized, more accurate and more efficient. As we saw in our article on Logistics 4.0, modern digital technologies and robotics are shaping a new concept of the supply chain: what elements define Supply Chain 4.0? How can the supply chain be optimized through digitization and automation?
Need for technology to collect and manage data

With supply chains becoming larger and more complex, information management has become an essential aspect to meet market demands. It is imperative to ensure the following:

Accuracy of data in inventory management: against a background of increasingly large SKUs or stock references, accurate inventory data not only makes it possible to optimize stock levels, but also to ensure a high level of service and avoid unwanted stock-outs. The use of warehouse software for inventory management is an important help in this regard.
Traceability of goods: As logistics traceability runs through global supply chains, it has proven to be an excellent complement for managing internal and external material flows. The traceability system only works thanks to barcode or RFID tagging technology, as well as data collection devices and software that manage the information exchanged in the supply chain.
Comprehensive control of KPIs: programs such as the Supply Chain Analytics software from Mecalux make it possible to control all the activities in the warehouse and their relationship with the other links of the supply chain, so that intralogistics operations are not compromised.

Better integration of all the actors involved in the supply chain

The selection of supply chain partners is increasingly focused on removing barriers between suppliers and building collaborative relationships. This is achieved through standardization of processes, joint planning of activities, and improved supply chain visibility. The use of advanced information management software is essential to moving away from operating in isolation and seeing the supply chain as a global entity.

Process automation strategies for greater accuracy and speed

Industrial automation, already used in product manufacturing and conversion, is also a key factor in supply chain optimization. It is present in the various areas of logistics:

  • Management of warehouse operations: warehouse management systems have facilitated the organization of processes and available inventory in increasingly complex facilities. Their role in optimizing order preparation tasks can be further supported with tools such as “pick-by-voice” and “pick-by-light.” This increases the number of picks per hour per operator and virtually eliminates errors.
  • Automated goods transport in intralogistics processes: Freight transportation is often at the center of automation projects because of its great benefits. In fact, today’s automated warehouses use a variety of automated systems to speed up the flow of goods and increase security in the facilities.
  • Transport route management: fleet management software is essential to coordinate the distribution of goods between the different nodes of the supply chain. These systems allow the organization of routes depending on logistical parameters such as delivery times, and also include strategies such as consolidation of goods or groupage.
  • Efficient supply chain management is unthinkable without optimizing the logistics of the companies.