How to efficiently supply your company with the required goods
This entry in the Soloplan Logictics Glossary provides information about the background of procurement logistics, typical tasks and strategies, and links to other areas of logistics.
Procurement logistics–definition
If a company cannot produce certain goods and parts itself, it obtains these components from external parties. These can be raw, auxiliary and working materials that are foreign to the company and obtained with an economical, needs-based focus.
Functions and tasks
Procurement logistics combine the distribution logistics of the suppliers with the production logistics of the companies. They are focussed on the needs-based and economical supply for the company.
The goal of procurement logistics is the physical provision of the required input goods, considering the type and amount required due to the performance process, as well as the time and location specifications. The process includes the purchase, order and retrieval, transport, storage and provision of the goods.
Meaning for companies
To be able to survive in international competition, companies need to produce products that generate added value. For that reason, it is essential to already use the full potential for optimisation during the purchasing process. To that end, procurement logistics need to be optimally organised. However, procurement logistics are influenced by external factors of the procurement markets, such as their structure, and by the type of provided goods (technical, physical, economical, etc.). To be able to guarantee the superordinate goals of profitability and guaranteed competitiveness, the following individual goals need to be fulfilled:
– Favourable conditions (purchase prices, access costs, warehousing costs)
– Flexibility of the suppliers
– High quality of the goods
– Security of supply
– Low stocks
Procurement strategy vs. procurement structure
As part of materials management, the procurement strategy first classifies the procurement goods. In this process, the market is analysed to see if the company should act actively or passively in the market. On the basis of this analysis, actions plans are created that determine the proper handling of the prices, quantities, stocks, etc.
During the determination of the procurement structure, the question as to what extent the company is to benefit from global cost differences or whether it is to focus on local markets is considered. Factors such as the ideal number of different suppliers, the real net output ratio of the company and the current consumption volume are considered.
Current situation and future
Due to the extended workbench and the “just-in-time” and “just-in-sequence” delivery trends, large parts of goods procurement are being dissolved. This has led to an increase in the momentum of goods transport and greater dependence on competition.
Conclusion
Procurement logistics is concerned with the provision of goods and materials and is thus an important part of logistics. It is influenced by external and internal factors and is decisive for the competitiveness and economic efficiency of the producing company. The process covers multiple areas that all have the goal of procuring goods in an optimal and favourable way.
