PROCUREMENT

AND LOGISTICS

WHAT IS PROCUREMENT?

The act of obtaining merchandise, capital equipment: raw materials,

services, maintenance, repair, and operating, supplies in exchange for
money or its equivalent.

The act of purchasing products or services, usually for commercial

objectives, is known as procurement. Because businesses need to request
services or acquire things on a wide scale, procurement is most typically
linked with businesses.

Procurement often refers to the ultimate act of purchasing, but it may

also refer to the entire procurement process, which is crucial for
businesses prior to making their final purchase choice. Companies can
be buyers or sellers on both sides of the procurement process, but we'll
focus on the soliciting firm here.

TYPES OF PROCUREMENT

Procurement may be classified in a number of ways. Depending on how

the firm will use the things bought, it can be categorized as direct or
indirect procurement. Depending on the commodities being bought, it
can alternatively be classified as goods or services procurement.

DIRECT PROCUREMENT

This term refers to getting anything needed to create a finished product.

This covers raw materials and components for a manufacturing
enterprise. It covers any products acquired from a wholesaler for resale
to clients by a retailer.

INDIRECT PROCUREMENT

Purchases that are necessary for day-to-day operations but do not

immediately contribute to the company's bottom line are often included.
This might range from office supplies and furnishings to advertising
campaigns, consulting services, and equipment upkeep.

GOODS PROCUREMENT

It usually refers to the purchase of tangible goods, but it may also apply
to software subscriptions. Good supply chain management procedures
are often required for effective commodities acquisition. Both direct and
indirect purchase may be included.
SERVICES PROCUREMENT

Its main focus is on acquiring people-based services. This might involve

employing individual contractors, contingent labor, law firms, or on-site
security services, depending on the organization. Both direct and
indirect purchase may be included.

TWO CATEGORIES OF
PROCUREMENT

1. Merchant Buyer – wholesalers and retailers who purchase for resale.

2. Industrial Buyer – purchase raw materials for conversion, services,

capital equipment, and MRO supplies.

PROCUREMENT

Is the process by which companies acquire raw materials, component,

products, services, and other resources from supplier to execute their
operation.

It includes sourcing, purchasing and covers all activities from

identifying potential suppliers through to delivery from supplier to the
users or beneficiary.

PURCHASING

Is the specific function associate with the actual buying of goods and service
from suppliers.

Sourcing

Is simply identifying and working with appropriate

suppliers

THE PRIMARY GOALS OF

PURCHASING

Ensure uninterrupted flows of raw materials at the lowest total cost.

Improve quality of the finished goods produced.

Optimized customer satisfaction.

PURCHASING CONTRIBUTES
TO THESE OBJECTIVES BY:

1. Actively seeking better materials and reliable suppliers

2. Work closely with strategic suppliers to improve quality materials.

3. Involving suppliers and purchasing personnel in new product design

and development efforts.

7 R’S OF PROCUREMENT

Right Price

Right Quantity

Right Quality

Right Time

Right Place

Right Source

Right Service

LOGISTICS

The planning, execution, and control of the movement / placement of

goods and or people, and the related supporting activities, all within a
system designed to achieve specific objectives.

LOGISTICS MANAGEMENT

Is a part of the supply chain management that plans, implements, and

controls the efficient, effective forward and reverse flow and storage of
goods, service and related information between the point of origin and
the point of consumption in order to meet customers requirements.

MAIN FIELDS WITHIN

LOGISTICS

Procurement Logistics

Production Logistics

Distribution Logistics

Disposal Logistics

ACTIVITIES INVOLVED IN
LOGISTICS MANAGEMENT
Order Processing

Inventory Management

Material Planning

Warehousing

Transportation

ORDER PROCESSING

Is the process or work – flow associated with the picking, packing and
delivery of the packed items to a shipping carrier.

It is the key element of order fulfillment.

INVENTORY MANAGEMENT

It is the overseeing and controlling of the ordering, storage and use of

components that a company will use in the production of the items it
will sell as well as the overseeing and controlling of quantities of
finished products for sale.

MATERIAL PLANNING

Is a production planning and inventory control system. It integrates data

from production schedules with that from inventory and the bill of
materials.

WAREHOUSING

Performance of administrative and physical functions associated with

storage of goods and materials.

These functions include receipt, identification, inspection, verification,

putting away, retrieval for issue.

TRANSPORTATION

Any device used to move an item from one location to another.

Common forms of transportation include planes, trains, automobile, and
other two-wheel devices such as bikes of motorcycles.

LOGISTICS

The planning, execution, and control of the movement / placement of

goods and or people, and the related supporting activities, all within a
system designed to achieve specific objectives.

TYPES OF LOGISTICS

Inbound Logistics

Outbound Logistics

Third Party Logistics

Fourth Party Logistics

Reverse Logistics

INBOUND LOGISTICS

Is an integral element of business operations for a manufacturing firm,

involving the processes or receiving, storing and distributing raw
materials for use in production.

OUTBOUND LOGISTICS

The collection, storage and distribution of the product to customers. For

tangible products this would involve warehousing, material handling,
transportation, in this case of services it may be more concerned with
arrangements for bringing customers to the service if it is in a fixed
location.

THIRD PARTY LOGISTICS

It is an outsourced provider by a firm to provide services to its

customers. It specializes in integrated operation, warehousing, and
transportation services.

FOURTH PARTY LOGISTICS

It is an integrator that accumulated resources, capabilities and

technologies to run complete supply chain solutions.

REVERSE LOGISTICS

Flow of surplus, or unwanted material, goods, or equipment back to the

firm, through its logistics chain, for reuse, recycling or disposal.

hi welcome to education leaves

in this video you are going to learn
what is procurement
the procurement process and what's the
difference between direct
indirect and services procurement
let's start the video procurement can be
defined as the process of acquiring
goods
and services from a third-party vendor
through direct purchasing
competitive bidding or tendering process
while ensuring the right quality and
quantity
procurement is most commonly associated
with businesses
because companies need to solicit
services or purchase goods
usually on a relatively large scale
procurement is usually a part of the
input to a company
that uses the procured goods or services
in the making of their own final product
this makes it a very vital function of
any business
procurement involves activities such as
identification of needs sourcing
selection negotiation ordering
receiving and payments
now come to the procurement process
the procurement process refers to the
identification and implementation of
certain steps
to ensure that they can acquire goods
and services to meet their requirements
and achieve their objectives the
procurement process isn't the same for
all businesses
because it can vary according to needs
each business has its own set of needs
and so it will have a different
procurement process compared to another
business
which has different requirements every
organization has a unique procurement
process flow
steps involved in a procurement process
are
step one identification of requirement
the first step in buying something is
recognizing that there is a need for it
that could be buy a new item or
reordering something when it is required
it is important that all the
stakeholders be consulted at this stage
to prevent issues later on in the
procurement process
step two determination of the specifics
of the requirement
when it has been identified that there
is a need the exact specifics of the
product or service that is required is
to be decided upon
this would include technical
specifications or
part numbers step three
sourcing once it is determined that a
specific item or service is to be bought
the procurement team has to then do the
research to determine the various
sources that supply it
for repeat orders there will usually be
a pre-existing vendor list
for new item suppliers will need to be
thoroughly investigated
to determine their reputation speed
quality
reliability and prices
step four negotiation and finalization
of price and terms
for direct purchases requests for quotes
will be sent to the shortlisted vendors
the usual practice is to get a minimum
of at least
three quotes before making a selection
the company to procure from will be
selected not only on price but also
based on their promptness
reliability and quality if there is a
bidding or tendering process for the
procurement
the selection of the qualifying bids
will be as per the terms and conditions
set
step 5. purchase requisition and order
a purchase requisition generated within
the company will be approved by the
appropriate authority
this will then lead to the generation of
a purchase order
with all the specifics of the order as
well as the terms and conditions
step six delivery of the purchase order
the shipment notice is sent to the buyer
wherever applicable
the delivery of the purchase order
depends on the practices of the buyer
and the seller it can be in person or by
email
this is also as per the specifications
agreed upon by both the buyer and the
seller
step 7 expediting
this involves creating the timeline for
the prompt delivery of the requested
goods or services
after factoring in any unforeseen delays
it may also include information on the
payment as well as delivery schedules
step 8. receive and inspection
when the product or service is ready it
is supplied to the buyer
it is the responsibility of the buyer to
thoroughly inspect the supplied items if
they match the agreed-upon purchase
order
the buyer can either approve or reject
it
step 9. payment process
if the buyer takes delivery of the item
it is implied that they are accepted and
the payment process starts
for the payment to be made the documents
relating to the order are studied
if there are any mismatches they have to
resolve them before payment
once payment is approved the payment is
made as per the agreed-upon modes of
payment
step 10. record-keeping and review
both the companies the buyer and seller
maintain their records for their
auditing and taxation processes
the entire process should be under
continual review in order to improve as
well as settle any disputes that might
have arisen
the steps of procurement detailed above
vary from business to business
but the logical flow remains the same
efficient procurement practices keep the
flow of purchased goods and services
quick and delay free
let's move on to the difference between
direct procurement
indirect procurement and services
procurement
[Music]
direct procurement is the purchase of
the input that a business requires an
order to manufacture its end product
this is the raw material that is
required usually for a manufacturing
related business
examples raw materials machinery
etc indirect procurement is the
procurement of services or
input that are not directly used in
manufacturing
but are essential for day-to-day
operations
examples office supply facility
management
travel maintenance service etc
service procurement is procuring and
managing the contingent workforce and
consulting services
for examples professional services
software subscriptions
etc if you want to read in details or
download the pdf
go through the link in the description
like
share the video and don't forget to
subscribe to my channel

hi welcome to education leaves

in this video i am going to discuss the
difference between procurement and
purchasing
let's start the video procurement and
purchasing are the two terms that are
often used interchangeably
if you ask a layman about the difference
you may get a reply that purchasing and
procurement are one and the same
but if you ask the same question to a
manager
you'll get a significantly longer answer
as to how
and why there's a world of differences
between purchasing and procurement
let's discuss what is procurement
procurement refers to the process of
identifying
shortlisting selecting and acquiring
suitable goods or services from a
third-party vendor through direct
purchase
competitive bidding or tendering process
while ensuring timely delivery of the
right quality and quantity
what is purchasing purchasing is the set
of functions associated with acquiring
the goods and services that an
organization requires purchasing is a
small subset of the broader procurement
function
this process includes activities like
ordering
expediting receiving and fulfilling
payment
lets explains the differences between
procurement and purchasing
the end goal of procurement is to
identify the company's needs and fulfill
the procurement of those needs
it is a strategic and proactive process
on the other hand the end goal of
purchasing is to arrange company
expenditure and buy goods and services
for the company
it is a reactive process
in procurement places more importance on
an item's value than how much it costs
but in purchasing more focused on price
than value
procurement involved in the end-to-end
activities that needed to acquire all
necessary goods and services
procurement does everything from need
recognition to sourcing
contract closure and record keeping
purchasing gets involved when it's time
to buy goods and services
tasks involved in purchasing our
ordering expediting
and payment procurement focused on
developing long-term and a win-win
relationship with suppliers
on the other hand purchasing focused on
making efficient transactions
not overly concerned with developing
vendor relations
if you want to read in details or
download the pdf
go through the link in the description
like
share the video and don't forget to
subscribe to my channel

logistics it is defined as the art and

science of obtaining producing and
distributing material and product in the
proper place and in proper quantities
logistics management it is the part of
supply chain management that plans
implements and controls the efficient
effective forward and reverse flow and
storage of goods services and related
information between the point of origin
and the point of consumption in order to
meet customers requirements
difference between supply chain and
logistics
transforming a raw material into
products and getting it to customers is
supply chain whereas movement of
materials in the supply chain is
logistics
the seven r's of logistics
the most popular concepts of logistics
management is the concept of the seven
r's it is concerned with getting the
right product in the right quantity in
the right condition at the right place
at the right time to the right customer
and at the right price
logistics functions
following the areas of logistics
management contribute to an integrated
approach to logistics within supply
chain management
transportation
many modes of transportation play a role
in the movement of goods through supply
chains via air rail road water or
pipeline
selecting the most efficient combination
improves the value created for customers
warehousing
when inventory is not on the move
between locations it may have to spend
some time in a warehouse
warehousing is the activities related to
receiving storing and shipping materials
to and from production or distribution
locations
third and fourth party logistics
third-party logistics providers actually
perform or manage one or more logistics
services
fourth party providers are logistics
specialists and play the role of general
contractor by taking over the entire
logistics function for an organization
reverse logistics it is a way to handle
the return reuse recycling or disposal
of products that make the reverse
journey from the customer to the
supplier
logistics value proposition
managers must be able to balance
logistics costs against the appropriate
level of customer service
logistics are usually managed as an
integrated effort to achieve customer
satisfaction at the lowest total cost
therefore service and cost minimization
are two key elements in logistics value
proposition
logistics goals and strategies
logistics shares the goal of supply
chain management to meet customer
requirements there are a number of
logistics goals that most experts agree
on
respond rapidly to changes in the market
or customer orders
minimize variances in logistics service
minimize inventory to reduce costs
consolidate product movement by grouping
shipments maintain high quality and
engage in continuous improvement and
support the entire product lifecycle and
the reverse logistics supply chain
an effective logistics strategy depends
on the following tactics
coordinating functions that is
transportation management integrating
the supply chain
substituting information for inventory
reducing supply chain partners to an
effective minimum number and pooling
risks
substituting information for inventory
it is one of the tactics used to design
effective logistics strategy it requires
taking a series of steps to construct
the logistics network
step 1 locate in the right countries
first identify all geographical
locations and then analyze your forward
and reverse chains to see if selecting
different geographic locations could
make the logistics function more
efficient and effective
step 2 develop an effective export
import strategy
determine the volume of freight and
units that are imports and exports and
decide where to place inventory for
strategic advantage
step 3 select warehouse locations
determine the number of warehouses
calculate optimal distance from markets
and establish the most effective
placement of warehouses around the world
step 4 select transportation modes and
carriers
determine the mix of transportation
modes that will most efficiently connect
suppliers producers warehouses
distributors and customers
step 5 select the right number of
partners
select the minimum number of firms
freight forwarders and third or fourth
party logistics to manage forward and
reverse logistics
step six develop state-of-the-art
information systems it reduces inventory
costs by accurately and rapidly tracking
demand information and the location of
goods
substituting information for inventory
it is another tactic used to design
effective logistics strategy
physical inventory can be replaced by
better information in the following ways
improve communications talk with
suppliers regularly and discuss plans
with them
collaborate with suppliers use
continuous improvement tools and share
observations about trends
track inventory precisely it could be
done by using gps and barcode systems
keep inventory in transit it reduces
inventory costs for example docking
use postponement centers
avoid filling warehouses with the wrong
mix of finished goods by setting up
postponement centers to delay product
assembly until an actual order has been
received
mix shipments to match customer needs
match deliveries more precisely to
customer needs by mixing different skus
on the same pallet and by mixing pallets
from different suppliers
and don't wait in line at customs reduce
the time spent in customs by clearing
freight while still on the water or in
the air
reducing supply chain partners to an
effective number
the more partners there are in the chain
the more difficult and expensive the
chain is to manage
consider a supply chain of three
echelons between factory and customers
two factory warehouses nine wholesale
warehouses and 350 retail stores
reducing the number of partners reduces
operating costs cycle time and inventory
holding costs
when consider reducing the logistic
partners look for an entire echelon such
as all the wholesale warehouses or
factory warehouses but if you eliminate
all partners as you would be back to the
vertical integration strategy
pooling risks
when manufacturers and retailers
experience high variability in demand
for their products they can pull
together common inventory components
associated with a broad family of
products to buffer the overall burden of
having to deploy inventory for each
discrete product this is called pooling
risks
this reduces storage costs and risks of
stock outs by consolidating stock in
centralized warehouses
flow of goods and information
these flows exist in each supply chain
enterprise must have internal process
integration and collaboration between
functions as well as alignment and
integration across the supply chain
customer information flows through the
enterprise via orders sales activity and
forecasts
value-added flow of goods begins as
products and materials are procured
you