There have been few periods in history when procurement, logistics and supply chain management issues have come under such intense scrutiny. From Brexit to the Covid-19 pandemic to the dramatic blockage of the Suez Canal, the general public have perhaps been more aware of how goods get to their doors than ever before. In fact, there was a period of time in 2020 when every conversation seemed to revolve around either the impending threat of a toilet paper shortage, a lack of adequate PPE or the escalating price of hand sanitiser as demand outstripped supply.
However, as any organisation with its own procurement processes and logistics requirements will attest, the need to develop a robust supply chain and manage it effectively is nothing new. According to one report from CIPS, almost 2,700 supply chain alerts were issued in 2018 alone. These issues can have both financial implications and costs to your business reputation, hindering your long-term productivity and success.
Understanding the relationship between procurement, logistics and supply chain management
To put it simply, procurement is the process of acquiring the goods your business needs to operate successfully. Logistics management, meanwhile, refers to the aspect of supply chain management that plans, implements and controls the flow and storage of goods and services. And finally, supply chain management is the broader process of turning the goods you’ve procured into products and services – then distributing them to customers as efficiently as possible.
However, as with any business process, there are layers and levels to consider. Procurement alone can involve a multitude of important factors, including:
- Developing quality standards
- Financing purchases and creating purchase orders
- Negotiating prices
- Buying goods
- Inventory control and management
- Analysis of cost-benefit and cost-utility
- Disposing of waste products
Meanwhile, overseeing your supply chain can involve working closely with entities such as:
- Vendors
- Warehouses
- Raw material gatherers
- Transportation companies
- Manufacturers and producers
- Distribution centres
- Wholesale warehouses
- Retailers
- In-house staff
- Stock room
Managing your supply chain effectively means overseeing the logistics of moving products, including quality control, market research, procurement, operations, distribution, finance, strategic sourcing and even customer service.
Why is procurement the cornerstone of effective supply chain management?
Most businesses are aware of the importance of effective supply chain management, yet according to Deloitte, only 50% of all procurement leaders had ‘high’ or ‘very high’ visibility into their largest suppliers, even six months into the Covid-19 pandemic. And as the report adeptly summarises, ‘you can't manage what you can't see’. When procurement fails (as it has publicly, for private and public companies frequently in 2020 and 2021), the entire supply chain fails.
However, lessons have been learned. One of the biggest regrets, highlighted by Chief Procurement Officers in the Deloitte report, was not accelerating digitisation or upgrading to new technologies that provide the visibility required to effectively plan and manage procurement in a new era.
The benefits of effective procurement and logistics in your supply chain management
You cannot optimise business success or maximise profitability without effective supply chain management – it’s that simple. Improving your organisation’s supply chain management strategy can improve its ability to compete in its field. Not only that, but it can also reduce costs in several key areas of your organisation and ultimately influence customer satisfaction.
Technologies like the Procure module in the 7bridges logistics platform are enabling businesses to gain granular visibility into their logistics suppliers’ performance, and simulate the impact of new contracts. Not only can this identify huge cost savings opportunities, but it can improve the overall effectiveness of your supply chain: improving the flow of goods and services into and out of your business. This helps to maintain productivity and quality when it comes to your business services.
Ready to get started? Get in touch with our team today. Alternatively, why not learn about the 14 steps to excel in logistics procurement here.
