From Logistics to SCM....... The Need Of the Hour !!!

The only truth in today’s business world is “Customer Retention” and this is one of the most difficult tasks also. The businesses in today’s era are facing huge competition from all sides weather directly or indirectly, and the only key to a business success is to retain the customers by providing “Customer Delight Customer is considered king in the market who dictates the market and makes the enterprise run. Therefore, we can say that the customer and market are inseparable from each other and thus, companies need o find the best possible ways to make the customer happy. Another most crucial thing that the companies cannot afford these days is the delayed response to the customer’s needs. The companies have to be present at the right place and at the right time when the customer needs the product else he will move to the competitor’s products instead of waiting for the products to reach him. In a competitive market meeting customer’s is the most difficult tasks, and thus comes the idea of Innovation & Invention which has becom the jargon of today’s business world.

Logistics in earlier days was thought to be the one of the supporting functions having no direct link with the customer satisfaction and having no relation with gaining competitive advantage. Companies thought logistics to be a useless burden involved in the process of serving the customer where in they have to unnecessarily deal with the Truck owners & Drivers and ultimately loosing additional money just to move the products from one place to another. But, there has been a paradigm shift from Logistics to a modern day concept of Supply Chain Management.

Ahead of all let us try to understand what exactly logistics means and how SCM is different from it.

As per the Definition in Oxford English Dictionary:-

“Logistics is the organization of supplies and services”

Putting into simple words the logistics may be defined as “An activity that involves the flow of goods, information & other resources” .

Logistics is thought to be originated from the military’s need to supply themselves with ammunition, food & other important supplies as they move from their base to a front position. in Business Logistics majorly dealt with the transportation of raw material or finished products from one place to another.

On the other hand a more complex operation is the SCM (Supply chain Management). A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such an integration can be achieved.

Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram [1993] compare supply chain management to a well-balanced and well-practiced relay team. Such a team is more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race.