Relationships between Procurement and Logistics in SCM

Both are important functions in supply chain management. Procurement is the process of sourcing goods (e.g. raw materials, components, finished goods) and services whereas Logistics includes transport, warehousing and added value services - end-to-end, from extraction to factory, to delivery, to maintenance and return. In this sense, the procurement function can also buy logistics services.

The logistics supports procurement and be called procurement logistics. When the procurement department buys good it requires the logistics function to organize transport and potentially the storage of the orders. Procurement logistics can also include quality control of the purchased goods, inventory management and several other added value services. Simply the procurement of almost any product, and many services, requires logistics.

The role of a Procurement team varies from organization to organization, but in almost every case they are responsible for working through agreements between a company and their suppliers/vendors. This can be for services, products, licenses, software, or almost any other commodity required by a business to operate effectively and support their customers.

As a result, purely negotiating a great price for a product is not enough in Procurement, especially in today’s market where good and services are sourced from all over the globe. Now Procurement teams are often responsible for ensuring a proper process is in place to effectively manage the entire vendor relationship and this can mean handling areas like shipping, storage, fulfilment, contracting, issue resolution and more.

Currently, in many organizations’ different aspects of the procurement process may be split out to various teams. For instance, the procurement person may be responsible for vendors selection and core pricing negotiations, while legal/contracts is brought in to handle the paperwork required, and a logistics team is brought in to manage the logistics components, but that almost never means procurement is completely devoid of any responsibility.

So when looking at the relationship between logistics and procurement, you should really be looking to understand who is engaged in the end to buying process, and what role does procurement play in the process for your organization. This will help you determine how/where there is overlap.

Procurement and logistics are not theoretical exercises and much value must be given to ‘feet on the ground’ experience. The procurement supply chain person needs the logistics supply chain person to organize to a full “journey” from beginning to final end, including all other tools needed to make a sound and safe adventure.

Procurement supply chain person draws up the strategic plans with suppliers to support the manufacturing flow management process and the development of new products. Activities related to obtaining products and materials from outside suppliers involve resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or programs.

The logistics supply chain person is concerned with the movement of a finished product/service to customers. In physical distribution/logistics, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant’s marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers.

Procurement is the process of sourcing goods (e.g. raw materials, components, finished goods) and services. In this sense, the procurement function can also buy logistics services. Logistics includes transport, warehousing and added value services - end-to-end, from extraction to factory, to delivery, to maintenance and return. The logistics that supports procurement can be called procurement logistics.

When the procurement department buys good it requires the logistics function to organize transport and potentially the storage of the orders. Procurement logistics can also include quality control of the purchased goods, inventory management and several other added value services.

So when looking at the relationship between logistics and procurement, you should really be looking to understand who is engaged in the end to buying process, and what role does procurement play in the process for your organization. This will help you determine how/where there is overlap 

Procurement and logistics are not theoretical exercises and much value must be given to ‘feet on the ground’ experience.

The procurement supply chain person needs the logistics supply chain person to organize to a full “journey” from beginning to final end, including all other tools needed to make a sound and safe adventure.

Activities related to obtaining products and materials from outside suppliers involve resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or programs. The logistics supply chain person is concerned with the movement of a finished product/service to customers.

In physical distribution/, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant’s marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers.

Logistics is also similar to procurement in many cases as you have to “procure services” as opposed to procuring materials/parts. You work with logistics vendors and freight forwarders to move products across states or even countries. Those vendors are responsible for handling movement of items and much more than that. They work directly with customs for example to get your products across the border while doing so in a compliant manner.

Procurement more often focuses on having parts either brought in from suppliers as turnkey items (already manufactured) or setting up in-house jobs for manufacturing (such as machining).