Operations Management of Logistics and Supply Chain

Conception and Scope

Logistics

Logistics is the management of the flow of goods between the point of origin and the point of consumption in order to meet some requirements, for example, of customers or corporations. The resources managed in logistics can include physical items, such as food, materials, animals, equipment, and liquids, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation software. The minimization of the use of resources is a common motivation in logistics for import and export.

Note that the above definition of logistics is not unified, although it might be indeed, in current environment, a commonly acknowledged one. For example, Council of Logistics Management (now renamed as Council of Supply Chain Management Professionals) referred to logistics as "the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements," which includes inbound, outbound, internal, and external movements and return of materials for environmental purposes.

As we can see, the concept of logistics focuses on the product flow, which is the meaning by which this word has been translated in Chinese. It also puts emphasis on the activities of handling product, which include the storage, transportation, distribution, and packaging and processing. Although business logistics involves many activities, the traditional research of operations management on logistics mainly relates to the fields of logistics facility, transportation, and inventory planning.

Supply Chain

Compared to "logistics," there appears to be even less consensus on the definition of the term "supply chain management". Kathawala and Abdou point out that SCM "has been poorly defined and there is a high degree of variability in people's minds about what is meant". Nevertheless, we present a rather widely adopted definition, which is given by Mentzer et al. which is rather broad, not confined to any specific discipline area, and adequately reflecting the breadth of issues that are usually covered under this term: "Supply chain management is defined as the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole".

The terms of "logistics" and "supply chain" are usually comparative in academy and industry, since both of them are closely relevant to the product circulation during its whole life cycle, and both have been regarded as the central unit of competitive analysis of model management science. Generally speaking, supply chain is a more broadened conception with a wider range which can involve other similar subjects, such as network sourcing, supply pipeline management, value chain management, and value stream management.

In addition, we can see that the conception of logistics has no relationship with organization, which is the opposite of supply chain, since supply chain is made up of multiple organizations, usually companies. An important issue in supply chain management is that companies will not seek to achieve cost reductions or profit improvement at the expense of their supply chain partners but rather seek to make the supply chain as a whole more competitive. Hence, the contention that it is supply chains, and not a single company, that compete is a central tenet in the field of supply chain management. A central research methodology for supply chain management is game theory (and also incentive theory for the scenario of incomplete information).