Procurement and Logistics - Inseparable Links of a Successful Supply Chain
To understand the importance of the relationship between procurement and logistics, you must first determine what these concepts include.
What is procurement?
Procurement is the act of acquiring, buying goods, services or works from an external source, often via a tendering or bid process.
What is logistics?
Logistics is a part of supply chain that handles the transport of any material across the supply chain.
At first sight, procurement and logistics are completely different concepts that are usually involved in different company departments. Quite often there is competition between procurement and logistics with respect to their importance. This state of affairs often leads to overall ineffectiveness. Therefore, it is important to understand the need for their close cooperation and mutual assistance.
When everything is done correctly, procurement process provides the company with all necessary elements for its operation. The procurement process includes the development of quality standards, purchase financing, negotiation, and, of course, the purchase of goods or services. At the same time, logistics, on the other hand, is a process by which goods are physically transported and delivered to the desired location in the required time. Logistics management has a coordinating and supporting role that is also a part of supply chain management. Logistics plans, implements and controls the flow and storage of goods, services and related information between the point of departure and the point of consumption in order to meet the company's needs.
What is more important – procurement or logistics?
The answer is simple - you just can not have one without the other. In today's global economy, understanding the importance of procurement and logistics is more valuable than ever. Supply chain management is a competent alignment process by which the supply of goods and services is carried on time and within budget. Nowadays, the speed at which business is conducted does not allow any signs of slowing down. This, in turn, exerts increasing pressure on the more efficient functioning of the supply chain. Success in the area of procurement and logistics depends on an understanding of the critical importance of both concepts. Another important role in achieving success is the company’s ability to establish long-term partnership between these two equally important elements of the supply chain.