Procurement Logistics
What is Procurement in Logistics?
Procurement in logistics is the process of sourcing, storing, and shipping raw materials used to manufacture products.
They may also source:
- Auxiliary supplies
- Replacement parts
- Operating supplies
This is a vital part of the manufacturing supply chain as if the procurement logistics process is disrupted by external factors or poor management, this can undermine the whole manufacturing process.
An experienced procurement logistics team will also help with other aspects of logistics such as ensuring effective purchase planning of products to keep costs low.
As aforementioned, procurement management is a vital part of ensuring the logistics process runs smoothly. They may be involved with the bidding process, creating contracts and the overall planning process.
The Procurement Cycle
The procurement cycle encompasses all operations from purchase to delivery at a manufacturing facility.
This is usually a four-step process:
- Purchasing
You must choose a reliable supplier who can deliver on the number of purchased products efficiently, by meeting deadlines while operating at the lowest possible cost.
- Goods receipt and storage
A goods receipt is a document used to track and record the movement of a product into a warehouse from one supplier to another. All items traded are accounted for.
- Supply
An efficient supply chain is key to avoiding shortages or overstocking – both of which can be costly! Ensure you have just enough resources to guarantee production and uninterrupted activity. External factors outside of your control such as, a supplier increasing their prices due to a shortage of raw materials, can impact your management process. Therefore, careful planning as part of your procurement management process such as demand forecasting (developing a pricing strategy for when the unexpected occurs and minimizing the impact of not receiving enough products) can protect your business for the future.
- Management
As aforementioned, an effective supply chain is created by experienced management and planning processes that work for your operations. Your inventory must be regularly managed in line with external factors such as the availability of raw materials, market competitors and changing law regulations. You must also manage your inventory to ensure you are not raising storage costs unnecessarily by overstocking or worse, keeping dead stock.
Procurement and Logistics Management
Why do procurement and logistics need to work together?
There are four key reasons:
- Prevent production congestion
- Keep storage costs low
- Efficient purchasing process
- Meet the company’s budget
Bad Procurement
Bad procurement practices can occur at any stage of procurement management and the manufacturing process as a whole.
Here are the top styles of bad procurement:
- Lack of communication with suppliers – suppliers must know your business’s aims/objectives
- Insufficient product knowledge – this can cause stocking issues
- No procurement strategy team – poor planning, higher costs, and less efficiency!
- Lack of management direction can cause sourcing, purchasing and production issues
- Non-compliance
- Low employee productivity and morale
Let’s sum it up!
So, let’s sum up everything you need to know about procurement logistics:
- Procurement logistics is the sourcing, storage and shipping of products used in manufacturing
- The procurement logistics process requires a strong management team
- The procurement cycle consists of four steps:
- Purchasing – a reliable supplier is crucial
- Goods receipt – tracks the movement of a product between suppliers
- Supply – efficiency is key to preventing shortages, overstocking or keeping dead stock
- Management – internal processes (inventory) must be managed, as well as external processes (raw materials, market competitors and changing regulations) for effective procurement logistics
- Communication with supplies is key to preserving a good working relationship
- Overstocking or keeping dead stock can be just as detrimental as no/low stock
- Non-compliance/cutting corners is malpractice and in many cases is also illegal
Procurement management is the key to success and solves most of the problems mentioned!
Our services
Procure Consult
With Procure Consult, we offer support with tender management and ad-hoc procurement consultancy. Our expert team will manage the end-to-end procurement process or help at any stage, as and when required.
Procure Health Check
With Procure Health Check, we’ll conduct a full review of the strategic and operational procurement processes within your organisation. We’ll identify the areas that need improvement and help you drive greater value from the procurement process.
Procure Analyse
The purpose of Procure Analyse is to conduct a high-level analysis of your spending activity. We’ll help you understand your current purchasing behaviour and highlight areas that can deliver greater value. Procure Analyse is also offered as part of Procure Health Check or as a standalone service.
Procure Outsourcing
With Procure Outsourcing, we deliver a range of procurement solutions on an outsourced basis, completely bespoke to you. This can range from delivering multiple tender projects as a package to delivering the full procurement function of your organisation.
Procure Post
Are you trying to find a supplier for your project? Post your tendering opportunity onto any of our 11 sector-specific portals for FREE with Procure Post!
Housed by our sister company, Hudson Discover, our portals host thousands of tendering opportunities for organisations of all sizes. For an additional cost, we’ll even help you identify your requirements and find the most suitable suppliers for your business.
Get in touch for a consultation and find out how we can help your business drive better value from procurement.
