CHAPTER 2:- Supply Chain Management
Difference between Logistics Management and Supply Chain Management
| Logistics | Supply Chain Management (SCM) | ||||||||||
| It is concerned with getting goods & services where | SCM encompasses all the activities associated with | ||||||||||
| they are required and when they are desired. | movement of goods from raw materials stage to end | ||||||||||
| user. | |||||||||||
| Logistics is a narrower concept. | SCM is a broader concept. | ||||||||||
| Logistics is concerned with inbound, manufacturing | SCM co-ordinates and co-operates among value | ||||||||||
| and outbound process. | chain members. | ||||||||||
| Logistical activities are conducted within the | SCM functions outside organization. | ||||||||||
| organization. | |||||||||||
| It originated from Military logistics. | SCM originated from Business Logistics. | ||||||||||
| Logistics is mainly concerned with optimizing the | SCM recognizes that internal integration by itself is | ||||||||||
| cash flows within the organization i.e. emphasize on | not sufficient. So emphasize on Internal Integration | ||||||||||
| Internal Integration. | as well as on external integration. | ||||||||||
| The objective of logistics is to minimize cost. | The objective of SCM is maximize profitability. | ||||||||||
| There are 2 flows in logistics: Value Flow & | There are three flows in SCM: Value Flow, | ||||||
| Information flow. | Information flow and Financial Flow. | ||||||
| The focus of logistics management depend upon the | The focus of SCM depend upon the management of | ||||||
| management of resource within the organization. | relationship in order to achieve a more profitable | ||||||
| outcome for all parties in the chain. | |||||||
Causes of the Bullwhip Effect
No communication up and down the supply chain.
Lack of co-ordination between various value chain members.
Delay in flow of information and material among chain members. Demand forecast inaccuracies.
Free return policies.
This is called as bull whip effect. Its results in sudden overload or shortage of stocks in SKU’s (Stock Keeping Units).
Concept of Extended Enterprise
Extended Enterprise is a self-organizing networks of firms that the combines their economic output to provide product and service offerings to the market.
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