What is a Supply Chain?

A supply chain is a network that connects a company with its suppliers to produce and deliver goods to end buyers. It consists of various people, activities, entities, and resources. Together, these elements create steps that ensure products reach customers.

Effective supply chains require collaboration among several organizations, including:

  • Suppliers

    They provide parts for manufacturing products or raw materials for production.

  • Manufacturers

    They use raw materials to create new parts or finished products.

  • Logistics

    This involves the storage and transportation of goods throughout the supply chain.

  • Wholesalers

    They purchase goods to distribute to retailers.

  • Retailers

    They sell the finished goods to customers.

The Wider Role of Supply Chains

Supply chain management also involves overseeing areas related to orders, inventory, and processes, such as:

  • Inventory Management

    This ensures stock levels are replenished timely to meet order demands, considering lead times and storage conditions.

  • Order Shipping

    Once customers confirm their orders, this aspect coordinates logistics to deliver goods as requested.

  • Shipment Tracking

    This monitors orders from procurement to customer delivery, sharing information with customers for online orders to facilitate planning.

  • Strategic Partnerships

    Organizations vet new vendors for maintenance, transportation, and manufacturing needs.

  • Troubleshooting

    Supply chains continuously review speed, cost, and quality to maintain service levels and profitability.

What is Logistics?

Logistics focuses on planning and executing the storage and movement of items throughout the supply chain. This coordination involves people, equipment, facilities, and resources to ensure products remain on schedule and are accommodated at each destination.

Key logistics processes include order fulfillment, inventory management, material handling, transportation, and demand planning. Essentially, logistics acts as a subsection of the broader supply chain, emphasizing how goods move from one location to another.

  • Logistics plans the movement of goods and their storage using appropriate transportation to meet delivery deadlines.
  • It generates necessary documentation, such as shipping labels and QR codes, to facilitate cross-border shipping.
  • Fleet management, shipment tracking, and advanced technologies enhance the monitoring and improvement of goods movement.

Logistics utilizes various transportation methods, covering land, air, and sea, to move goods globally. Companies consider cost, time, and efficiency when selecting the best transportation options.

Main Differences Between Logistics and Supply Chain

The descriptions above highlight the differences between logistics and the supply chain. Some major distinctions include:

  • A supply chain encompasses multiple organizations, while logistics focuses on an individual organization.
  • The supply chain is essential to any retail business plan, while logistics is often treated differently.
  • Supply chain management cannot be outsourced, yet logistics can be, with third-party logistics being a significant sector.
  • The term “supply chain management” emerged from modern trade, while logistics originated in military contexts.
  • Supply chain management connects organizations with shared interests. In contrast, logistics manages the transfer and flow of goods within an organization or between companies.
  • Both logistics and supply chain management require specialized software tools, although they differ in purpose.

Key Questions to Ask a Logistics Provider

If you consider outsourcing your logistics, evaluating costs is crucial. However, you should also ask key questions before making a commitment:

  • Do you have experience with businesses similar to mine?

    This is valuable for small businesses with infrequent sales or individuals handling their own fulfillment. Ensure the provider can manage and fulfill your order type effectively.

  • Are there any capacity restraints?

    Confirm that your fulfillment partner can scale up rapidly during periods of growth or seasonal spikes in orders. A reliable provider will have a warehouse management system to maintain trackable procedures.

  • Where are your warehouses located?

    Choose fulfillment companies near your primary sales areas to enable quick order fulfillment. For nationwide sales, select a company with warehouses in strategic locations for fast deliveries.

  • Do you provide real-time inventory data?

    Access to real-time stock levels strengthens your position with customers, allowing effective planning. Be sure to ask how the fulfillment company handles minimum stock procedures.

  • Do you support returns?

    A reputable provider should handle returns, a common aspect of e-commerce. If not, plan to process returns yourself instead of relying on the fulfillment company.

 

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