If you are reading this article you are almost certain familiar with the term supply chain management. It is thought been first coined in 1983 by Keith Oliver, as a consultant with Booz Allen Hamilton, in a magazine article in the UK.
The term logistics has been around for centuries – and who can forget UPS’s marketing program using the “We love logistics” catch phrase around 2010. More recently, “last mile logistics” has been so associated with ecommerce fulfillment that many ordinary consumers have made the connection.
However, there has never been much clarity around the relationship of the term concepts. Do they refer to basically the same thing? Or is logistics a subset of supply chain management? Maybe. We’re even heard a few over the years that say supply chain is a subset of logistics.
As one opinion on this matter, the highly respected supply chain program at Michigan State University puts it this way on a web page: “While these two terms do have some similarities they are, in fact, different concepts with different meanings. Supply chain management is an overarching concept that links together multiple processes to achieve competitive advantage, while logistics refers to the movement, storage, and flow of goods, services and information within the overall supply chain.
What we haven’t heard much of is the term supply chain logistics. While certainly around, from our view it is rarely used in print or in presentations.
But with saying that, just a week ago the analysts at Gartner published a short blog post titled “Supply Chain Logistics: Drive Greater Business Impact.” Was there a purpose here to move the supply chain logistics term to the forefront?
Probably not: SCDigest’s guess is that “supply chain” added as a prefix to logistics was for search engine optimization purposes, i.e., to get ranked when someone searches on supply chain
So with that intro, let’s summarize the Gartner blog post itself.
After noting the financial impact of the supply chain for companies dealing in physical goods – representing as much as 80% of total costs in some enterprises – Garner says that “Faced with budgetary increases year over year, a looming recession and increasing expectations from supply chain leaders, logistics managers must get smarter at supply chain cost optimization.”
And just what is that?
Garter says companies need to begin by differentiating between cost reduction and cost optimization. The former, Gartner not surprisingly says, involves eliminating spend and saving money, such as by negotiating better freight rates, reducing transportation delivery dwell times, and similar somewhat mundane though important tactics.
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 By contract, cost optimization, Gartner says, involves eliminating wasteful and redundant processes and creating self-service tools, designed to drive efficiency, productivity and innovation from logistics management.
Those steps sound a lot like traditional cost cutting to us, but Gartner said there is an important difference in focus between the two.
“Mature logistics organizations combine both cost reduction ouand cost optimization initiatives to achieve the best outcomes,” Gartner says, adding that companies should “segment and prioritize cost optimization opportunities using varying time horizons, such as short-, medium- and long-term.”
Gartner also says that depending on whether the logistics function is seeking to reduce cost by operating better or deliver more sustainable cost optimization by altogether transforming how it does things, it is critical that logistics managers manage executive and other stakeholder expectations.
Gartner concludes by noting that “Cost optimization in supply chain logistics management must seek to balance service delivery with the best customer experience, at the right level of cost to be effective.”
And SCDigest will conclude by observing that Gartner seems to use the terms supply chain, logistics and supply chain logistics interchangeably.
Any reaction to Gartner's thoughts her? Let us know your thoughts at the Feedback section below.
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