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Logistics - What is it?
Thursday 24th May 2018
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Supply Chain

One of the most common questions - it's even been a phone-in question on Radio 2 - is about the substantive differences between Logistics, the Supply Chain and "Lorries and Sheds"

Everybody is at a different point in their use and understanding of the terms.
As a measure of this diversity (and, we think, confusion) we doubt that any randomly chosen 25 logistics managers will have similar job descriptions.
Both the language and understanding are changing all the time, and can be best seen in a historical perspective.

Here's our view …

gap
   

Here's our view

Where we were.

Forecasting, purchasing, production planning, warehousing (in and out) and distribution all used to be in different parts of the organisation. The different functions might talk to each other, and might share the same planning cycle. They might even share the same base data. On the other hand, they might not …

Tower of Babel >>> Logistics

The term Logistics was applied to an integrating function which tried to bring the activities together, without them necessarily reporting as one function. This distinction is important, logistics is primarily an integrator. There must always be departments, perhaps Order Input or Credit Control, whose activities can affect the supply chain yet do not 'belong' to logistics.

This integration was overdue. Many firms stopped there.

In bringing disparate functions into a common interest group, we added co-ordination. We didn't always add comprehension, that came next …

Logistics >>> Supply Chain

The customer doesn't see the weakest link in a supply chain, he sees the sum of all the accumulated weaknesses. Have you ever played 'telephone ping-pong' to try and get a problem sorted? And ended up wondering how many other things went wrong along the way? [Example]
Logistics needed to comprehend, not just coordinate. The ability to see everything as part of an interactive chain is, we think, the defining difference between Logistics and Supply Chain.

Rather few companies have this understanding.

Supply Chain >>> Demand Chain

The very word Supply implies 'push', that goods flow down the chain towards the customer. As the market got ever more demanding, it helped to think of the flow of information (demand, or orders) flowing up the chain in order to 'pull' goods down. Supply and Demand Chains are now used almost interchangeably, but where they are differentiated it's the demand chain which responds to the market.

While some companies, especially supermarket suppliers, have learned to respond to the market realities, rather fewer fully understand the chain dynamics.
Until they do, they are victim, not master.

Demand Chain >>> Value Chain

Value chain is a new-ish term, and is still being refined. In our book, it adds two insights to the old demand chain definition.

  1. With all the added value demands on suppliers, can/should we add ever more value, and can we earn a (bigger) crust as a result? There's some underlying questions for most organisations … do we make a profit on every stage of our chain? Do we even know? If it's not profitable, why are we doing it?
    We know of one firm who, in times of product shortage always gave priority on what they had to their least profitable customer.
  2. If your customers give you problems (for instance with daft quantities on ex-stock orders) you had better help them (to help both of you) or your rival will.

The idea that the chain stretches from your supplier's suppliers to you customer's customers and that all of it can or could be managed is exciting all of us in this profession.

Where are you?

We don't know. And, for the minute, don't care. We offer tailored solutions, and it's part of our task to figure out where you are in the understanding and application of Supply Chain & Logistics, and to help you move from there to a more profitable and successful future. If that's a simple fix, fine. If it's some advanced strategic thinking, that's fine too. We've probably already done both.

We'll do whatever it takes to get to delighted, talkative clients … [Top]


How to lose Customers fast

This story comes from an immaculate source and perfectly illustrates the point. It emerged only after I had exactly this experience.

The most common single complaint to XYZ corporation was not that their goods were faulty or late, accounts receivable in a mess, or any of the usual suspects.
The most common single complaint was that they answered the original complaint inaccurately. So a customer who wrote or phoned in an effort to straighten out the problem ended up mad as a hatter at the rotten treatment they got.
If there's a faster way to turn passive customers into active enemies, and to undo the millions spent on advertising, we don't know of it.

In passing, when firms or governments claim improvements, that can mean everyone just got fed up complaining, and quit. [Top]

If most of the inputs are in control most of the time, the outcome is still erratic.
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