procurement logistics
Procurement in logistics covers activities before production. It involves sourcing raw materials and components, often coordinated with the purchasing department. Goods enter the warehouse and move to production.
Procurement logistics focuses on optimal order quantity and frequency. It can follow reorder point or fixed schedule methods based on quantity and time.
With the reorder point approach, inventory is monitored, and when the safety stock level is reached, an order is placed. The advantage lies in optimizing order quantity to maximize truck capacity, reducing transportation costs.
Fixed schedule ordering involves regular, scheduled orders like the 15th of each month or quarterly. While suppliers can plan well, quantities depend on customer demand, leading to varying order sizes. This can affect transportation efficiency and sustainability.
"The procurement process in logistics involves the selection, purchase, and sourcing of raw materials, components, or products necessary for a company's production or service processes. This process plays a crucial role in a smooth and efficient supply chain.
The significance of the procurement process for the supply chain encompasses several aspects:
Quality Assurance: Efficient procurement ensures the availability of the right materials in the required quality and quantity to meet production standards and requirements.
- Cost Control: Procurement directly impacts costs, with factors such as purchase prices and contract negotiations being essential. Optimized procurement contributes to cost reduction throughout the supply chain.
- Supplier Relationships: Close collaboration with suppliers is vital for building a reliable and responsive supply chain. Effective procurement fosters long-term, partnership-based relationships.
- Risk Management: Procurement helps identify and manage risks in the supply chain, such as supply shortages, quality issues, or geopolitical challenges.
- Sustainability: Responsible procurement considers environmental and social aspects, promoting sustainable practices throughout the supply chain.
Overall, the procurement process is a central component of logistics and the supply chain. Efficient and well-managed procurement supports a company's competitiveness by minimizing costs, ensuring quality, and ensuring a smooth flow of resources."