It’s OK to Be Confused About Supply Chain Jargon
At Logistics Bureau, we like to create blog posts that delve deep into strategic and operational issues, explore what’s happening in the supply chain world, and share insights that inform even the most seasoned practitioners and business leaders.
Sometimes though, we also like to remember that not all our readers have been in the supply chain game for years, and that when you’re just starting to learn the business it can be a confusing and complex environment.
It’s OK to be Confused, But Not to Stay Confused
Occasionally then, we just like to go right back to basics and share a little knowledge about supply chain fundamentals, like how to translate “Supply Chainese” into straightforward English terms. That’s the focus of today’s post, in which we address a few points of our industry lingo that often perplex supply chain newcomers.
Like many people you may have found yourself in a situation at work where you were totally at a loss to understand the jargon being used.
Maybe you found that:
- You didn’t understand the topic
- The terminology went right over your head
- You were embarrassed you did not understand
- You knew you needed to know more about the topic…
Or maybe you didn’t even know what you needed to know. When it comes to Supply chain management, this is how lots of people feel.
You might be a University Student, the managing Director, CEO, or Transport Manager. Lots of business people and students want to gain a better knowledge of Supply chain management and how it ‘fits’ in business today.
An Introduction to the Basics of “Supply Chainese”
Supply Chainese—it’s a language all of its own. You’ll find that terms like Supply Chain, logistics, transportation, and distribution are all used—often interchangeably. Many people confuse the terms and don’t appreciate the differences, so don’t worry if you’re among that number.
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer.
For commercial organisations, it’s also about providing appropriate levels of customer service to customers, at as low a cost as possible, to maximise profit margins.
Think about a Supply Chain as including all the people and processes, right from sourcing of raw materials through to delivering finished goods to the customer or consumer. That covers a lot doesn’t it?
A Quick Terminology Tutorial
Even professionals who already work in supply chain roles can find themselves wondering if they’re using the right terminology. So to save you from being permanently confused about supply chain jargon, here are some brief definitions of terms that are often misunderstood.
Distribution
Usually means the outbound (customer facing side) of the business dealing with the warehousing and transport of goods to customers. OK, that one’s easy.
Logistics
This is a bit broader. It’s really about managing the flow of products right from the point of supply, to the customer or consumer. And it’s more often focused upon the physical movement and handling of the product.
Supply Chain
Then Supply Chain is even broader. How so? Well this definition from The Council of Supply Chain Management Professionals is a good one…
“Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities.”
Importantly, supply chain management also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. It generally includes managing external organisations too, like suppliers and transport companies.
Who Works for Whom?
If you wanted a hierarchy of these terms, like in an organisational structure, it would go like this:
The Distribution Manager works for the Logistics Manager, who works for the Supply Chain Manager, but realistically (except in the case of very large companies) you would not expect to see all three of these managers in a company, as the roles can actually overlap a fair bit.
Increase Your Understanding of “Supply Chainese”
If you’d like some further information to help you unravel supply chain jargon and terminology, you might like to check out these resources:
You could also sign up for one of the programs offered by our educational division. Supply Chain Leaders Academy is a blended learning program combining practical workshops with in-depth online study classes, while Supply Chain Secrets is an eLearning solution suitable for supply chain practitioners at any stage of their careers.
Editor’s Note: This post was originally published in May 2012 under the title “About Supply Chain”, and has now been revamped and updated with more comprehensive information.
