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Procurement logistics: definition, tasks & objectives
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Procurement logistics: the link between the procurement market and production
Procurement logistics in companies is a subsystem of logistics and serves as a link between the distribution logistics of suppliers and the company's own production logistics. Procurement logistics thus connects the procurement market and the company's own production. Accordingly, procurement logistics describes all processes involved between purchasing and the transportation of input goods to the incoming warehouse in a company.
Contents
The 6Rs of logistics as objectives of procurement logistics
Procurement logistics is of central importance to a company's success. It is responsible for ensuring that production runs smoothly and does not come to a standstill due to missing quantities or poor quality of the input goods. Smooth production in turn leads to punctual delivery and high customer satisfaction.
It is therefore very important to define the tasks and objectives of procurement logistics. These can be summarized well with the 6 Rs of logistics, which describe the so-called logistical mission:
- The right product
- At the right time
- In the right place
- In the right quantity
- In the right quality
- At the right cost
Procurement logistics has the following tasks to achieve these goals:
- Determination of material requirements
- Identification, evaluation and selection of deliveries and suppliers
- Specifying an order time
- Material disposition
- Selection of the transport company
- Goods receiving, quality control, container management, temporary storage, sorting and order picking
- Outsourcing and provision for the production
The elements of procurement logistics: purchasing, scheduling and goods receipt
Purchasing:
Purchasing is the first element of procurement logistics and is of central importance. The focus is on finding the right suppliers for the required materials, which must be ordered and delivered at the right time. Analyzing the procurement market and optimal planning can realize cost saving potentials if executed and strategized correctly.
Procurement planning:
Procurement planning monitors the ordering processes, determines optimal ordering times and adjusts ordering processes if necessary. Here, for example, an ABC analysis can be used to prioritize goods or a make-or-buy analysis to evaluate whether goods should be produced in-house or ordered.
Goods receiving and warehouse management:
After delivery, the goods are checked for quality defects and the delivery is documented. In the ideal digital case, this takes place using an ERP system. There are various strategies for putaway and warehouse management (e.g. LIFO, FIFO, LOFO, etc.), which start depending on the product category, warehouse size and other factors.
Procurement logistics: from traditional procurement to digital supply chain management
Building on the theoretical basis of procurement logistics, the immense importance of efficient material supply for a company's success is evident in practice. The procurement of goods and services must be as cost-efficient and timely as possible in order not to interrupt production processes and to secure competitive advantages. In view of global supply chains and increasing market dynamics, traditional procurement is facing considerable challenges, which necessitates a shift towards modern, digitalized approaches.
Traditional approach: Traditional procurement
In traditional procurement logistics, orders were processed manually, based on simple demand forecasts and historical consumption data. Communication with suppliers was often by phone, fax or email, which led to delays and errors. Stock levels were kept high to cover uncertainties in delivery capability, which resulted in increased storage costs and capital commitment. The lack of transparency in the supply chains also made it difficult to adapt to market changes and led to inefficient processes.
New: Digital supply chain management
The modern approach to procurement logistics relies on integrated and digital supply chain management. Procurement processes are automated and optimized through the use of ERP systems, electronic data interchange (EDI) and advanced planning tools. Real-time data enables precise determination of requirements and just-in-time deliveries significantly reduce stock levels. Leaps in innovation in AI and big data analytics enable predictive analytics, allowing companies to react proactively to market changes. Closer networking with suppliers via digital platforms increases transparency and agility in the supply chain, which ultimately leads to cost reductions and efficiency gains.
Practical example: Automotive industry
A leading automotive manufacturer transformed its procurement logistics by implementing a digital supply chain management system. By integrating suppliers into a common IT system, ordering processes were automated and communication was carried out in real time. This led to a 35% reduction in stock levels and lowered procurement costs by 20%. Delivery times were shortened by an average of two days and production capacity utilization increased to 95% due to higher material availability. These optimizations resulted in annual savings of over 50 million euros and significantly strengthened the company's market position.
Conclusion: Digital procurement logistics for competitive advantages in the market
Procurement logistics forms the backbone of successful supply chain management. It ensures smooth production, enables potential cost savings and ultimately promotes competitive advantages on the market. Success depends to a large extent on close cooperation with suppliers, robust processes and digital integration. Despite challenges such as susceptibility to disruption and geographical dependencies, new technologies such as AI and IoT offer promising solutions for the future of procurement logistics.
