The link between logistics procurement management and the service quality of a business is very close. Because when choosing to purchase production materials and storing them effectively, the quality of the products provided will become more complete. This article will provide ways to manage warehouses and select and purchase logistics materials effectively to meet the professional requirements of customers.
What is logistics procurement management?
Logistics procurement management is defined as the activity responsible for supplying raw materials or general goods to a warehouse or manufacturing plant. This is to ensure that business operations (production, distribution or sales) are carried out properly and efficiently. Logistics also includes the physical distribution of objects, thereby integrating many functional activities, including transportation, storage, loading and unloading, packaging, distribution, processing and information. And through management processes, it creates value and meets the requirements of both customers and society.
Logistics procurement cycle
The procurement process or cycle includes all activities from the time a purchase or other goods-related request is made until the product is received at the facility (warehouse, manufacturing center or store).
This cycle varies depending on whether the organization is an industrial manufacturing enterprise or a business specializing in distributing goods (dealer).
- Industrial Manufacturing Enterprises: This cycle involves the procurement process that connects the base warehouse with the production center. Raw materials will be placed on storage shelves until required by production lines. Raw materials will be manufactured into final products and wait to be shipped to customers.
- Specialized distribution business In this case, the purchasing cycle is simpler. The company purchases and stores finished goods until they are shipped to the final customer.
What activities does logistics procurement include?
To make your shopping efficient, you need to consider the following activities:
- Demand Analysis: What resources does the company require to carry out its operations during a specific period of time? It is important to establish the quantities of materials, supplies and services required to manufacture or sell a product.
- Procurement: Through this transaction, you will get the right amount of resources and services at the lowest possible cost. It is essential to choose a supplier that guarantees, in addition to competitive prices, quality and agreed delivery dates. Here, lead time is a deciding factor.
- Goods receipt and storage: Resources arrive at the assembly area and are placed on racks until they are needed on the production line. Finished goods are also stored once they leave the manufacturing center.
- Inventory Management: Inventory management directly affects the speed of all activities that make up the procurement cycle.
Purchasing activities involve many parts of the company: General management, responsible for planning the acquisition of products, logistics and handling post-purchase customer requests. Organizing and coordinating activities smoothly will help make shopping more optimal.
The problem with ineffective logistics procurement management
If the shopping is not well managed, you run the risk of serious problems. The most common are:
- Shortages or stockpiling : Product stock shortages will result in lost sales, reduced productivity, or, in the worst case, extended periods of production downtime due to a shortage of resources needed for the operation. You need to calculate the minimum level of inventory, which allows you to cope with any objective factors related to changes in demand.
- Excess inventory: This happens when you have purchased more goods than you need and they are not sold quickly enough. They increase storage costs unnecessarily.
- Dependence on suppliers: This tends to happen when companies make purchases in a rush and without planning. Therefore, any problems with suppliers will impact the entire procurement cycle.
All problems stemming from inefficient procurement processes have a common consequence: a significant increase in operating costs. Good procurement management makes it possible to offer more affordable prices and better service and ultimately, be more competitive in the market.
Conclude
Logistics procurement management is one of the most important tasks for the entire supply chain. Good inventory control will help businesses better meet the increasing demands from customers.
Long Quyen provides the best logistics solutions for goods storage, helping you manage your warehouse more effectively. Contact us to get effective advice for your warehouse.
Long Quyen Company is a leading manufacturer of industrial shelves with 25 years of experience in manufacturing and installing thousands of warehouses according to the ISO9001-2018 quality management system. Contact us for free site survey, free design and best quote. Thank you.
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