Supply chain management and traditional logistics management have significant differences in inventory management methods, goods flow, cost, information flow, risk, planning and inter-organizational relations. These differences make supply chain management more advantageous than traditional logistics management. From the perspective of inventory management and supply logistics, in supply chain management, inventory management is coordinated among supply chain members to minimize inventory investment and cost; while traditional logistics management pushes inventory forward or backward, depending on which supply chain member has the most initiative. In fact, traditional logistics management pushes inventory to suppliers and reduces inventory investment in channels, which is just transferring inventory. The solution to this problem is to reduce uncertainty and reduce safety inventory by providing information about production plans, such as sharing information about expected demand, orders, production plans, etc. From the cost perspective, supply chain management optimizes the supply chain by focusing on the final cost of the product. The final cost mentioned here refers to the total cost that actually occurs when it reaches the customer, including the purchase price and delivery cost, inventory cost, etc. Traditional logistics management is still limited to minimizing costs within the company.
Risk and planning are two other important aspects that distinguish supply chain management from traditional logistics management. In supply chain management, risks and plans are shared and communicated by supply chain members, while traditional logistics management only stays within the company. In terms of inter-organizational relations, members of supply chain management reach cooperation based on the control of final costs, while traditional logistics management is based on reducing costs within the company.
Supply chain management is implemented because it is more dynamic than traditional logistics management and can bring more substantial benefits to supply chain members. However, to successfully implement supply chain management, there must be good information sharing among supply chain members; and it is not an easy task for companies pursuing different goals to share information openly and honestly, especially when a company cooperates with many of its competitors, it is even more difficult to achieve information sharing. Therefore, successful supply chain integration first requires that all node companies reach consensus on the following aspects: jointly recognize the service demand level of the final customer, jointly determine the location of inventory in the supply chain and the inventory volume of each inventory point, and jointly formulate policies and procedures for managing the supply chain as an entity.
The first aspect mentioned above is relatively easy to achieve, but it is often easy to neglect this goal when making decisions. The service needs of the final customers are the key to determining inventory in the channel. Successful manufacturers can identify customers and their needs, and then coordinate inventory flows within the manufacturer’s own scope and the entire channel. The second aspect is the basic operating principle of logistics management, that is, the content of meeting customer needs should include what is needed, where it is needed, and how much is needed. The third aspect requires the sincere cooperation of enterprises at all nodes in the supply chain to be realized. Only when enterprises at all nodes look at the problem from the perspective of the entire supply chain, it is easy to understand and compromise with each other, jointly formulate certain policies and procedures, and then establish a comprehensive logistics organization.