In any manufacturing company, material flow can be basically classified into three phases.
- Flow of raw material from suppliers into the manufacturing facility.
- Flow of material within the manufacturing facility as they are processed.
- Flow of finished goods from the manufacturing facility to the end customers.
To be responsive to the global competition, Organizations must be able to manage the complete flow of material from the suppliers, through manufacturing, till the end product reaches the customers.
Hence organizations must be involved in the management of management of suppliers who provide direct and indirect material inputs, must increase the manufacturing competitiveness and must effectively manage the network of distribution systems responsible for delivery of the product to end customers.
From this realization emerged the concept of supply Chain.
Supply Chain: The supply chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage (extraction), through to end users, as well as the associated information flows. Material and information flows both up and down the supply chain. The supply chain includes new product development, systems management, operations and assembly, purchasing, production scheduling, order processing, inventory management, transportation, warehousing, and customer service.
Supply chains are essentially a series of linked suppliers and customers; every customer is in turn a supplier to the next downstream organization until a finished product reaches the ultimate end user.
Supply Chain Management (SCM): SCM is the integration of all the activities in the supply chain to achieve a sustainable competitive advantage. Supply Chain can be broadly classified of comprising of three networks – Supplier, Firm and Distribution.
The supplier network consists of all organizations that provide inputs, either directly or indirectly, to the focal firm (i.e., the purchaser). Focal firm’s network is involved in the conversion of input material to the output material. The distributive network consists of all downstream organizations from the focal firm that ensure that the right quantity of goods is delivered to the appropriate customer location in a timely manner.
Logistics: Logistics, also called as Physical distribution, focuses on the physical movement and storage of goods and materials. Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption.
Typical issues in logistics are evaluation of various transportation options, packaging options, inventory management for different channels, develop and manage networks of warehouses when needed, and manage the physical flow of materials into and out of the organization.
Therefore, logistics is a subset in the broader scope of SCM.
