Logistics is just one piece of supply chain management. Supply chain management manages all the links among suppliers, producers, distributors and customers.

Other elements of supply chain management include manufacturing and delivery-related customer service. Logistics helps synchronize the supply chain by controlling the flow of goods from the point of origin to the point of consumption. Participants in the supply chain, like suppliers and buyers, find partnerships helpful. Two firms work together for their mutual benefit. These partnerships are often open-ended, unlike strategic alliances or project partnerships.

Supply chain partnerships require:

1. Frequent and open two-way communication
2. Cooperation on accurate, efficient order execution
3. Coordinated decision-making
4. Sharing of resources
5. Information and knowledge exchange

The most important partnerships include suppliers and vendors on the supply side. On the demand side, the critical ties are among logistics providers, retailers, wholesalers, distributors and end customers.

Suppliers may collaborate closely with important customers on product formulation, product size, product mix, SKUs, inventory levels, supply forecasts, risk management, cost control, waste reduction and ordering systems. The customer may want to work together with logistics providers on pacing, packaging, scheduling and route efficiency.

Damage Liability in Logistics

Damage liability for goods lost and damaged while in transit or storage is one area of disputes in logistics. Inventory represents a big cost for businesses, and buyers want protection against losses while goods are in the supplier’s control. Suppliers also want to limit liability.

As a result, the contracts often state how to store and transport materials. Details cover temperature, length of storage, shipping labels and other conditions. Contracts spell out needs for special handling, such as protective packaging or having a particular end standing up. They also address if it is acceptable to stack boxes or store goods underneath heavy items.

To prevent losses, the customer will ask the supplier to track the location of the goods and confirm the correct quantity. If it’s feasible, the customer may want to double-check by visiting the supplier’s warehouse and perform inbound quality inspection if it hasn’t been inspected before it leaves the vendor. Some materials may not need to be inspected, such as low-cost and maintenance, repair & operation supplies (MRO), but the quality department should provide the warehouse with instructions for sampling, inspecting and rejecting failed materials.

The two sides use formulas for damage compensation based on actual value or a set amount per pound. The supplier or customer may get insurance to cover this risk, and both parties may both agree to share the risk by each obtaining partial insurance coverage.

Supply Chain Management vs. Logistics

Supply chain management looks collectively at multiple business activities to achieve a competitive advantage. Logistics focuses on the flow of goods to meet customer needs.