Logistics and Supply Chain: what are the differences ?

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Supply Chain and Logistics are sometimes considered as synonyms, wrongly.

Because if these two concepts relate to the organization of flows within companies, and to the provision of a given product to the final customer, they are however quite distinct and serve different objectives. While the combination of activities related to logistics and supply chain is worth 200 billion euros in turnover and represents nearly 2 million permanent jobs in France (according to the government report France Logistique 2025), it is important to understand what differentiates them.

What is logistics ?

In order to fully understand the difference between Supply Chain and Logistics, we need to go back to the basics. What exactly are we talking about?

Let’s start with logistics, which is concerned with the movement and maintenance of goods in and out of the company. In other words, it refers to a series of operations related to products once they have been manufactured. These operations concern the reception, warehousing, storage, handling, packaging and transportation of products to be shipped to final customers in optimal conditions of time and quality (and, as far as possible, at the lowest cost for the company).

In short, logistics begins when products are received and stored until they reach the hands of customers. By extension, the term also describes all the resources (material, human and financial) used to manage these operations, as well as the processes for optimizing them.

Several types of logistics can be distinguished :

Internal logistics

Also known as intralogistics, it includes all the activities whose aim is to ensure the availability of the product within the imposed deadlines and in the best cost conditions. As well as all the operations carried out within the warehouse, such as storage, supply, etc.

Outsourced logistics

It is the fact for a company to subcontract its logistics in part or in its entirety. It calls upon one or more service providers to take charge of all logistics operations, from stock management to the preparation and dispatch of orders.

Distribution logistics

It sells finished products to consumer markets.

Transport logistics

This is the management of the various aspects of product routing: nature of the transport, risks, availability of means, etc.

Return logistics

It returns the unused/unusable products to third party sites for storage, processing or recycling.

We can also separate two main logistic flows :

  • The supply flow (upstream of production: from supplier to manufacturer, i.e. raw materials, semi-finished products, consumables, etc.) ;
  • And the distribution flow (downstream of production: from the manufacturer to the customer, i.e. the distribution of finished products).

In doing so, logistics is only one part of the supply chain process, as we will see.

What is the Supply Chain ?

In the Supply Chain and Logistics duo, the first notion can be translated as “logistics chain” or “supply chain”. It covers a field of application which integrates logistics, but which, taking into account the various professional activities mobilized and their coordination, is much broader.

In short, it covers the entire chain from the supplier of the product to the final customer who is destined to use it.

In fact, logistics is only one link in the vast supply chain, whose operations can be broken down as follows :

  • Production and quality
  • Innovation
  • Industrial strategy
  • Purchasing and supply
  • Warehousing
  • Storage
  • Handling
  • Demand Management
  • Routing
  • Customer Experience
  • Customer Service
  • General Deployment

This long chain that encompasses the Supply Chain and logistics includes a multitude of professions related to logistics (precisely). But also: transport, handling, or IT management. It alone represents 60 to 90% of the cost price of products (source : France Supply Chain).

What are the differences between Supply Chain and Logistics ?

As can be seen by taking a close look at Supply Chain and Logistics, these two concepts, sometimes confused and often intertwined, are very different.

Their main disparities can be expressed as follows :

  • Logistics implements means to manage goods flows and to improve these flows. Whereas the Supply Chain is an optimization concept close to a business model that integrates logistics into its processes;
  • The Supply Chain is handled internally by a company. On the other hand, logistics includes external flows;
  • Supply Chain and logistics differ in their objectives! The second one targets the satisfaction of the final customer in a logic of cost rationalization. The first one is a lever of optimization of the chain whose goal is not only the customer satisfaction, but more globally the competitive advantage (it is a question of taking the ascendancy on its competitors).

We can also say that Supply Chain and Logistics are opposed in that the notion of supply chain implies continuous arbitration between contradictory approaches, in order to find the right balance.

For example, it may be a matter of balancing :

  • speed of delivery (or shipment) and cost of transportation,
  • availability of goods and rational stock management,
  • polluting transport and more ecological transport,
  • choosing to work with distant suppliers or to favour local production,
  • etc.

This is an essential difference between Supply Chain and Logistics: the former is constantly questioning the viability and relevance of the means deployed.

This brings us back to an essential aspect of the Supply Chain : sustainability. There is, indeed, a strong sustainable dimension in this notion, whose very nature (a lever for optimizing flow management operations) constitutes a response to the societal and environmental challenges faced by companies worldwide.

For the latter, it is not only a question of ensuring that the right product is delivered to the right person at the right time, but also of ensuring that it is manufactured with respect for people and transported with due regard for environmental requirements. This is where Supply Chain and Logistics do not have the same objectives.

Supply Chain and Logistics : closely related activities

These differences between Supply Chain and Logistics should not make us forget that these two activities are closely linked, and that the good management of one necessarily has effects on the other. In an increasingly demanding world where things go faster and faster, companies must :

  • be more flexible and responsive,
  • be ready to adapt to a changing ecosystem,
  • offer personalized services to their customers.

In this sense, the Supply Chain calls for a notion of “steering”. IT tools are put in place to coordinate both the supply chain operations and the many actors involved, to optimize the processes at each stage and for each link, and to make strategic decisions leading to greater efficiency. This is what is known as Supply Chain Management, i.e. the joint optimization of the supply chain and its purely logistical dimension.

Supply Chain Management, in short, is the culmination of Supply Chain AND Logistics !