Procurement management encompasses all the processes involved in the management of the materials needed for manufacturing, such as hiring staff, negotiating and creating contracts with third-party logistics providers.
The basic way to define procurement logistics is the procurement of materials needed to manufacture products.
Procurement logistics is the aspect of the supply chain that deals with the sourcing and purchasing of the materials needed to manufacture products. It involves the purchase of raw materials, supplies and other items instrumental to the success of the manufacturing process.
Procurement logistics also involves the storage, organization and shipment of these materials to and from the warehouse.
It includes obtaining the following necessities:
· Raw materials
· Operating supplies
· Replacement parts
· Auxiliary supplies
The procurement logistics team is responsible for creating purchasing strategies to keep the cost of acquiring materials as low as possible. They are also responsible for product sourcing and selection policies. If the smooth flow of procurement logistics is hindered, efficient production and storage warehousing will be compromised, which will, in turn, create a strain on the distributor and customers.
Procurement and logistics management need to work together effectively to ensure that a company does not go over its budget for manufacturing costs which include the cost of procuring materials.
Most of the time, small companies work with third-party logistics providers to help them with the management of resources required to create a successful supply chain.
The logistics processes involved with procurement can be categorized as follows:
· Product Policy: This is the aspect of the procurement logistics operation that involves packaging materials, manufacturing details and warehousing considerations.
· Terms and Conditions: As the name of this category denotes, it focuses on the “fine print.” It involves the terms that define the extent of the services of the procurement logistics provider, which are laid out during contract negotiation.
· Communications Strategy: This involves the way in which a company intends to make a product available. This aspect of procurement logistics tends to be one of the most intense areas of the supply chain. Each part of the communications strategy requires materials procured, to improve the availability of a product to all customers and business-to-business partners.
· Purchasing Strategy: The purchasing strategy involves the steps the company intends to take to obtain the materials needed for manufacturing, which includes analysis of the current market trends and deciding on how to cut costs without compromising quality. This helps to drive a competitive advantage among suppliers.
Be sure to partner with AMG Logistics to take care of all your logistics needs