In today’s procurement world most CPOs and CFOs are well aware of the logistics importance.
Logistics is a crucial factor that determines successful performance of work in almost all organizations. It is especially difficult to overestimate logistics’ importance when it comes to trading and manufacturing companies. Logistics is equally important for both: large industrial enterprise producing machines, and for a small bakery.
What is logistics
There are many definitions of logistics. Sometimes, they are so puzzling that even an expert is not able to understand what it is all about without specifications. In spite of this, logistics can be explained in a few words – it’s a management of inventory in motion and at rest.
Many people limit the concept of logistics by reducing its meaning to transportation and storage. However, it’s a big mistake. Logistics is a broad concept that incorporates such logic operations as planning, execution, control, purchasing, sales, inventory management, etc.
Okay, we are done with logistics. Now it is time to define procurement logistics.
What is procurement logistics?
According to Business Dictionary, procurement logistics is the systematic coordination of all aspects of the procurement process including bids, price negotiations, assuring proper quantities and specifications, shipping and delivery. Its main goal is to obtain materials, services or products at the best possible cost that meet the needs and time constraints of the organization.
Procurement logistics helps leads to solve a bunch of questions, such as: what to buy, when to buy, where to buy and in what quantities. Logistics provides a list of methods that can be applied to resolve certain issues. For example, to select the best provider logistics applies analysis and supplier evaluation.
Something about Logistic Analysis
In most cases, analysis is performed by means of expert estimations. To answer procurement logistics questions it is necessary not only to choose the right product, but also to determine its best purchase form.
At this stage logisticians analyze which procurement option will bring in more revenue for the business. In cases when specific items are popular among buyers, experts have to provide procurement option that would give the opportunity to maintain the excising demand and avoid production or sales downtime. Logistic analysis is also helpful in evaluating the significance of goods in stock and in reviewing the need of its creation or purchase.
All in all, logistics provides an extensive list of benefits for every developing company. The most important thing you should remember – without well-adjusted logistics it is be hard to create a profitable enterprise. Therefore, once you embarked on the path of procurement, don’t forget about logistics!