There's no easy answer to the questions "What is logistics?" and "What is supply chain management?" But the Council of Logistics Management has taken up the challenge and made a very credible attempt. At its 2003 annual conference, the council unveiled a new definition of the term supply chain management, along with an "enhancement" to its existing definition of logistics (see sidebar).
I applaud the definition committee's intentions, its hard work and even its results, but I'm also alarmed. In its zeal to be comprehensive and inclusive, the group came up with a very broad list of the many functions and responsibilities that may be included under those headings. And I can't help but wonder if organizations will soon begin realigning themselves to reflect the new definitions.
And that, as Yogi Berra is alleged to have said, would be "déjà vu all over again." In 1963, a group of traffic and distribution managers and educators formed the National Council of Physical Distribution Management to promote awareness of a profession—physical distribution management—and the significant contributions it made to the corporate bottom line. As the profession evolved and the terms physical distribution and materials management fell out of favor, they were replaced by logistics. In 1985, NCPDM changed its name to the Council of Logistics Management. Distribution executives quickly assumed the new title of "logistics manager" wherever and however they could, even though in many cases their responsibilities did not change.
Now in 2004, as CLM begins to promote its new definition of supply chain management, can we expect the same? I hope not, but indications are it's already happening. In a few cases, supply chain titles have already been bestowed upon logistics executives. And I predict that during 2004, CLM will at least consider a change in name that will include the term "supply chain."
In my view, that would be ill advised. As CLM currently defines these terms, there's almost no limit to their scope. There are very few corporate functions that are not included either in the definition itself or in the descriptions of relationships. Indeed, this definition of supply chain management is so broad that no one executive could possibly manage the integration and linkages necessary to make it work. Essentially, managing the supply chain means managing the company plus its external relationships with customers and suppliers. The only true supply chain executive is the chief executive officer.
Is logistics an important part of supply chain management? You bet it is. In my view, it's the most important function under the supply chain umbrella. But it's just a part and no doubt will be for some time to come. I believe it's critical that we recognize this and strive, at least for now, to become excellent distribution center managers, customer service representatives and logistics executives.
What we cannot afford to do is convince ourselves that as logisticians, we automatically are qualified to become supply chain executives. It's a long leap from being an excellent distribution center manager or logistics manager to supply chain mastery. Many good logisticians simply haven't mastered the skills required for effective supply chain management—human relations skills, negotiating expertise, and a knack for fostering collaboration and integration among them. If they expect to succeed at the next level, they must find a way to acquire them.
Evolving from a logistics executive to a supply chain executive will not be quick and it won't be easy. It will come only after we truly understand that this part of the business is about relationships, not operations.We have a lot of walking to do before we can run.
The Definition of Logistics
Logistics management is that part of the Supply Chain Management process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.
These are the boundaries and relationships of Logistics Management adopted by the Council of Logistics Management: "Logistics Management activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management of third party logistics services providers. To varying degrees, the logistics function also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution—strategic, operational and tactical. Logistics Management is an integrating function, which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions including marketing, sales manufacturing, finance and information technology."
The Definition of Supply Chain Management
Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.
These are the boundaries and relationships of Supply Chain Management adopted by the Council of Logistics Management: "Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the Logistics Management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology."