Logistics Management and Purchasing and Supply Management Based on your experien

Question

Logistics Management and Purchasing and Supply Management

Based on your experience or readings, discuss the interface between Purchasing and Supply Management and Logistics Management – specifically with respect to selection of a third party logistics provider, analysis of the total cost of ownership, use of e-procurement capability, integration of the transportation (in-coming and out-going) spend, and management of just-in-time inventory control.

How do Purchasing and Supply Management and Logistics Management “fit” within the framework of distribution management – particularly control of in-process and finished goods inventory?

What is the role of Purchasing and Supply Management and Logistics Management professionals in the implementation of a supply chain management strategy?

Explanation / Answer

The interface between purchase professionals and logistics team is very crucial to maintain a seamless flow of material and information across the supply chain. It may be so that purchase professionals may be incentivized to buy goods at a discount if bulk discounts are available from suppliers, but a holistic approach of total cost of ownership is required which requires handling as well as inventory carrying cost to arrive at a final decision. Similarly concepts such as just-in-time can only be successful if there is synchronization between purchase and logistics team. The logistics team should be providing indent to purchase based on the demand from sales and based on estimated turnaround time. The purchasing team should also commence work on procuring items based on the envisaged turn around to maintain only an optimal inventory and facilitate just-in-time. Any deviation in process would imply keeping more inventory as buffer and defeat the objective of just-in-time.

Purchasing and logistics management professionals have to ensure to keep optimum raw materials and also to maintain suitable evacuation service levels to ensure minimum acceptable inventory and lower working capital. As purchase professionals, they have to ensure that input raw material is purchased at minimum cost and buffer inventory is maintained at optimal level without any excess working capital being blocked. Similarly logistics professionals have to ensure that they are able to service customer requirements as per defined timelines with minimum variability which reduces the need to maintain excess inventory at warehouses.

The role of Purchasing and Supply Management and Logistics Management professionals is crucial in developing a sustainable strategy in supply chain for gaining competitive advantage. A buy in of purchasing and logistics team as well as alignment of skill and training is crucial to achieve efficiency in supply chain and minimize cost in logistics.

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