Your business is thriving, and you're ready for the next chapter of your ecommerce journey. Translation? It's time to outsource part of your fulfillment to a team of experts. There's only one problem: you're not sure what you need. We often see this with our clients here at All Points, so you're in good company. Here's what you need to know about logistics vs supply chain so you can better assess your needs and find the perfect partner to accelerate your growth.
Logistics vs Supply Chain: The Basics
We'll cut right to the chase: What's the difference between logistics and supply chain for ecommerce businesses? Logistics is the process of getting your products into the hands of your customers, while supply chain, or supply chain management, is about how the working parts like your supplier(s), your inventory, and your logistics work together.
We'll give you another way to think about it: Logistics would be the people in a symphony who play the instruments—they ensure the sound moves from the orchestra to the audience's ears, much like logistics ensures your products move from your warehouse to your customers. Supply chain management would be the entire symphony—all the parts working in harmony, from the composer (your supplier) to the conductor (your inventory) to the musicians (logistics).
We'll dig deeper into this concerto later. For now, just remember that logistics is about delivering the goods, while supply chain management is the entire process of creating and distributing those goods.
Understanding the Role of Logistics in Ecommerce
Yes, logistics distributes products to your customers and ensures efficient transport, but logistics is more than moving parcels from point A to point B. Logistics and logistics management, in the ecommerce realm, centers around the effective management and control of the flow of goods, energy, information, and other resources (like products, services, and even people) from the production source to the market. It involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security.
Logistics providers help ecommerce businesses with specialized transport of finished products, offload inventory into their own storage facilities, and help ensure that production and inventory levels are in sync so you're never out of your most popular product. Overall, logistics businesses specialize in everything that happens from when your products are made to when your customer unwraps and keeps them or sends them back.
Logistics is all about keeping your ecommerce business running smoothly and efficiently. Without it, it's easy for things to come grinding to a halt or run less optimally.
Understanding the Role of Supply Chain Management in Ecommerce
Meanwhile, supply chain management (SCM) oversees the wider scope of your ecommerce operations. On top of the duties encompassed by logistics, SCM delves into the coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In short, SCM integrates supply and demand management within and across companies. In some cases, this even means juggling and optimizing multiple supply chains.
To be clear, if you need a 3PL to handle your order fulfillment, having a SCM provider doesn't save you that expense. Your SCM experts will manage your 3PL for you but don't carry out fulfillment like logistics operation experts.
SCM essentially serves as the grand puppet master, with a hand in every step along the supply chain process, from procurement and production to distribution channels and customer service. It's about seeing the bigger picture and making strategic decisions to optimize all aspects of your ecommerce operation, aiming to increase customer satisfaction.
The Key Components of Logistics in Ecommerce
Ecommerce logistics is comprised of several interconnected pieces that can, when in sync, deliver a beautiful picture of efficiency and customer loyalty and satisfaction. (You can also consider this a list of responsibilities you'll need to plan for if you want to try to tackle in-house logistics.) Here's what you need to know about each of the pieces logistics focuses on:
Inbound Logistics: The supply part of the supply chain process. Both supply chain and logistics companies handle getting materials or products for your company into the warehouse.
Inventory Management/Inventory Control: Adequate stock levels ensure you can swiftly fulfill orders and keep your customers content.
Warehouse Management: A well-organized and efficient warehouse improves the speed of order fulfillment. When your products are never out of place, picking and packing move swiftly.
Packaging: This isn't merely about pretty boxes with ribbons. It's about presenting your brand's persona while ensuring the products aren’t damaged in transit.
Transportation: The responsibility of getting your items from the warehouse to the customer's doorstep in the fastest, most cost-effective, safest manner possible falls upon transportation.
Delivery and Returns (Reverse Logistics): Efficient delivery and easy returns make happy customers and improve your brand's reputation. Be prepared with a stress-free return policy when things just don't work out so your customers are left with a good experience even if they send back the product.
Each of these elements, if timbered correctly, can play a pivotal role in building a successful ecommerce brand.
Optimizing Order Fulfillment: Logistics in Action
A third-party logistics provider (3PL) promises much more than just a well-organized warehouse. These knights in shining logistics armor can streamline your operations, making sure your customers receive your products on time, every time.
First off, a 3PL can catapult your inventory management process into the twenty-first century. They're wizards at keeping things organized and anticipating the ebb and flow of supply and demand. A 3PL can help you maintain an optimum level of inventory, reducing the chances of stockouts or overstock.
Additionally, the warehousing skills of a 3PL are nothing short of extraordinary. They’ll take charge of receiving, storing, and tracking your products, ensuring no items are lost in the abyss of a warehouse.
And then comes the pièce de résistance: order fulfillment. A 3PL uses top-notch systems to automate order fulfillment, extracting those "oops, we messed up your order" situations from your business vocabulary. From order picking and packing to shipping and handling returns, a 3PL ensures that your customers receive their orders with a smile.
Integration with diverse transportation networks for seamless transportation management is another fine art of a 3PL. It's like they have a sixth sense for freight rates and routes, providing you with the most efficient carriage solutions. They also throw in reliable shipment tracking, a winning feature with customers.
Finally, these logistics experts don’t shy away from tackling complex cross-border ecommerce issues. With expertise in import/export regulations and paperwork, a 3PL can help your business expand globally without the typical headaches—kind of like having a fast pass at a packed theme park.
In a nutshell, a 3PL has the potential to turn your ecommerce logistics into a smooth, well-oiled machine, letting you focus on perfecting your products while they take care of the rest. Truly, optimizing these logistical aspects can act as the magic potion your ecommerce business needs to ascend to new heights of growth and customer satisfaction.
The Key Components of Supply Chain Management
Supply chain management works at a higher level than logistics. A supply chain organization thinks about each step in your broader supply chain, whether each step works as it should, and how each step flows into the next. Overall, these companies help a supply chain run smoothly. The major supply chain management activities are:
Planning: This is where supply chain organizations plan to match manufacturing and customer demand. Demand planning ensures your company doesn't pay for more materials than it needs.
Sourcing: Supply chain organizations work with suppliers to procure enough materials, check that the vendors can deliver the quality and amount needed, and work to get the best prices.
Production: The production planning phase includes several supply chain processes: assembly, testing, inspection, and packaging. These companies also ensure the finished goods will meet customer's requirements during this part of the process.
Distribution: Yes, both supply chain management and logistics businesses handle distribution. This phase includes logistics operations and fleet management.
Returns: SCM providers can help move products back through the supply chain, from returns to repairs and refurbishments if your products need them.
Effective supply chain management is tailored to your business needs. So, if you're operating internationally, a partner firm would oversee your global supply chain. These businesses build an operational framework with a collaborative supply chain network, but their management is an active process. To meet rising customer expectations, a great partner organization will continually monitor how everything's working and provide supply chain troubleshooting when needed.
Supply Chain Management: An Overview
Your supply chain is the lifeblood of your ecommerce business. Picture it as a complex machine in which every small cogwheel (component) plays its part in making the whole engine run smoothly. Supply chain management professionals think strategically about the overall supply chain and how each part works together.
The first cogwheel is procurement, the process of sourcing and purchasing raw materials or products. It's just like grocery shopping, except on a much larger, more complicated scale. It's all about matching supply with demand while minimizing costs and maximizing efficiency.
Next is production. Here's where your raw materials undergo a magical transformation (with a sprinkling of human effort and machine power) into the final product that your customers covet.
Thirdly, distribution, which represents the steps taken to move the goods from one point to another (typically from production to the end consumer). This step is like paving a smooth road on which your goods will glide effortlessly into the arms of your eager customers.
And let's not forget the management in supply chain management. This involves orchestrating the operations of the supply chain to optimize efficiencies and slap any abnormalities or disruptions right out of the park. It's the glamorous task of tying everything together and making the supply chain "sing," if you will.
Last, but by no means least, returns management. This process, also known as 'reverse logistics,' deals with returns from customers and maintains customer happiness by acknowledging and rectifying any missteps along the way. (For the record, this is something handled by most logistics companies as well.)
Each of these key components of supply chain management for e-commerce businesses plays a vital role in creating a sound supply chain process that marvels your customers with each interaction.
Supply Chain Management vs Logistics: Key Differences
At a high level, you now know that logistics providers deliver products and handle every step from the warehouse to the final destination, while supply chain partners coordinate multiple organizations to ensure you have a well-managed supply chain that runs smoothly from getting raw materials to delivery of your final product. While those two functions are different, companies that handle supply chain and logistics can both be a huge help to your company—so what are the biggest differences for you?
Despite their key role, partnering with a logistics company like All Points generally allows you to maintain significant control over your operations. You set the plays, while logistics businesses are on the ground executing them. With SCM providers, on the other hand, you'll need to be more hands-off and trust that you hired the right firm to handle all the moving pieces.
Choosing between Logistics and Supply Chain Management Support
You're standing at a fork in the road, trying to decide between teaming up with a logistics company or prancing over to the supply chain management side. We get it, it's tough. Here's how to figure out which one meets your company's needs.
First up, let's take a hard look at your operations. If your head is spinning faster than a hamster on a wheel from keeping track of product deliveries, warehousing, and inventory, then a logistics company might just be your knight in shining armor. Logistics focuses on the nitty-gritty details of moving your products from point A to point B flawlessly.
On the other hand, if you feel like you're juggling too many balls, trying to coordinate between suppliers, manufacturers, and distributors while ensuring that everything flows smoothly without any hiccups, then supply chain management professionals may have the magic touch you've been searching for. They're the maestros orchestrating the entire symphony of your overall supply chain, looking at the bigger picture to improve cost efficiency and performance.
What You Want vs What You Need One pitfall to avoid here is the trap of sticking to what you think you need rather than what your business actually requires. Put simply, it’s not what you want, it's what you need. You might prefer to manage every step yourself, but outsourcing to a team of experts can clear your plate for more strategic tasks—like planning your next product line. So, try to take an objective look at your operations and where your time is best spent. Some ecommerce companies aren't quite ready for a 4PL that manages their supply chain—and that's OK. Your business is no better or worse for not needing supply chain management. Strategically outsourcing logistics to a team of experts like All Points can also accelerate your business and give you a competitive advantage in your industry. If your supply chain is simple or just running smoothly, you likely only need specialist logistics providers to help optimize how your products get to the final customer.You may, however, need the high-level review and streamlining of your business operations that a team of experts reviewing your supply chain brings.Take your time when you're assessing your business needs, review your options, and choose wisely. Whether it's logistics or supply chain management, remember: It’s not about choosing the most impressive company, but the one that fits your unique business needs like a glove.