Supply Chain Management (SCM) and logistics are often used interchangeably in the management of activities and processes that ensure products efficiently move from the suppliers to the end consumers. Individually, SCM is defined as the management of interconnected network of businesses that are involved in the supply of products to an end user (Mangan, Lalwani & Butcher, 2008). Logistics on the other hand is defined as the management of resources to ensure they flow from their point of origin to their intended destination (David & Stewart, 2010).
The three main relevant components and activities of logistics are order processing, management of inventories and freight transportation (Sachan & Datta, 2005). Schoenherr (2009, P.5) and Tokar (2010, p. 18) listed other smaller functions such as customer service, storage and handling of materials, information processing, demand forecasting, purchasing, facility location, product planning among others as crucial in the fulfillment of the major activities(Manuj & Mentzer, 2008, p. 12). Tokar (2010, P. 20) asserts that each of these supporting functions is geared towards achieving the overall purpose of logistics.
Logistics plays a crucial role in any economy. First, it is one of the major expenditure avenues for businesses essentially affecting and being affected by other economic activities (Jan, Jonsson & Johansen, 2008, P. 9). Gubi, Arlbjorn and Johansen (2003, p. 11) state that logistics contribute heavily to government revenues through taxations and licensing of businesses. Secondly, logistics supports the flow and movement of many economic functions by ensuring that goods and services arrive at their designated places in time (David & Stewart, 2010, p. 18). Moreover, logistics adds value to products by creating time and place utilities (Closs & Xu, 2000 p. 23). Utility represents the usefulness or value of a service or a good to fulfill a need.
In an organizational context, logistics supports marketing. Marketing is anchored on an organization determining the needs and wants of a given target market and thereafter delivering the desired products more efficiently and effectively than the organization’s competitors (Akkermans, Bogerd & Vos, 1999). Moreover, logistics plays a central role in coordinating the four Ps of marketing (product, price, promotion and place). It achieves this by ensuring timely delivery of goods and in their right quantities (Kotzab, 2005, p. 54).
The interconnectedness between logistics and SCM prompted Larson and Halldorsson, (2004) to consider the differences and areas on integration between SCM and logistics and in so doing came up with four conceptual perspectives on Supply Chain Management (SCM) and Logistics. These are: the traditionalist perspective, the Unionist perspective, re-labeling perspective and the Intersectionist perspective.
Re-labeling entails a name change; what was previously known as logistics is now known as SCM. Larson & Halldorsson (2004, p. 4) opine that SCM deals with the planning and control of total materials flow from the suppliers to the end users a function which replicates logistics. According to Larson and Halldorsson, (2004, p. 5) re-labeling is narrow in terms of breadth because it focuses solely on logistics but it is deep in terms of depth because it has to address several functions relating to SCM.
The traditionalist perspective positions SCM within logistics in that it is considered as “logistics outside the firm that includes customers and suppliers”. This perspective is narrow and restricted to a single function-logistics. It is also shallow in terms in terms of the strategies that can be achieved (Larson & Halldorsson, 2004, p. 5).
The Unionist perspective considers logistics to be as a function of SCM; SCM subsumes logistics. The SCM executive heads purchasing, operations, logistics and certain elements of marketing. This perspective is deep and broad because it includes strategic and tactical elements across multiple functional areas (Larson & Halldorsson, 2004, p. 5).
The intersectionist perspective focuses on the strategic and integrative elements across logistics, purchasing, operations, marketing and other related functions. The logistics and SCM functions overlap (Larson & Halldorsson, 2004, p. 5). This strategy is shallow because it is purely strategic.
The traditionalist and the intersectionist perspectives are shallow in terms of depth, while the re-labeling and the unionist strategies are deep, strategic and tactical in terms of depth. In terms of breadth, the traditionalist and the relabeling are narrow because they are singularly functioned to address logistics. The unionist and the intersectionist perspectives are broad because they entail multiple functions.
A survey by Council of Supply Chain Management Professionals (CSCMP), from wholesaling, manufacturing, retailing, warehousing, transportation etc. and also from diverse ages and job titles. The professional were quizzed on their perspectives to SCM and logistics. The unionist perspective was the most popular with 47%, intersectionist was the second most popular with 28%, while the traditionalist and the re-labeling occupied the third and fourth spots with 19% and 6% respectively (Larson & Halldorsson, 2004, p. 9).
The evolution of a dynamic business environment as a result of advancements in Information and Communication Technologies (ICT) as well as efficient modes of transport makes some of the perspectives more preferable to the others (Waters, 2011, p. 17). In addition, changes in management styles, growth of multinationals among other factors influence the relationships between SCM and Logistics (Randall et al 2011, p. 10).
The most compelling perspective is the unionist perspective. This perspective is the most plausible because it fulfills the individual functions of both SCM and logistics (Menachof et al 2009, p. 8). Moreover, the coverage of the functions is more comprehensive and as such it has the potential to deliver better results and contribute to the expansion of a business (Milgate, 2001, p. 57). Functions that are merged under the unionist perspective include customer service, customer relationship management, manufacturing flow management, procurement, and order fulfillment among others. Overby and Min (2001, p. 34) opine that whenever closely related business functions and processes are placed under the same department the processes become more efficient because of the synergy developed among the functions.
Several business researchers effectively see logistics as an effective subset of SCM as depicted in the unionist perspective. Mangan, Lalwani and Butcher, (2008, p. 21) assert that logistics is in most cases seen as operating within an organization, although it manages flows between the organization and its customers and suppliers. Modern SCM departments include logistical flows, customer order management, production processes and all the information necessary in monitoring all the activities at different nodes of a supply chain. It is therefore prudent to conclude that the unionist perspective of relating SCM and logistics is the most plausible of the four unanimously agreed upon by the CSCMP.
References
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