It is often considered by many that procurement is purchasing and logistics is limited to transportation. However, it is not entirely true. Logistics and procurement, both are the important functions of any supply chain.
In simple words, procurement is about managing inflow of products such as raw material while logistics generally deals with outflow and distribution of the finished product. Similar to the difference between supply chain systems and logistics, there are also differences between procurement and logistics. Let us understand the definition of logistics and procurement and their respective roles in the supply chain.
What is procurement?
Procurement refers to the sourcing of raw materials, components, etc. It involves various steps such as exploring best suitable items, getting quotes, negotiations, placing an order, purchasing items, receiving and then conducting quality checks. The purchase department of an organisation conducts these activities. Relationship between procurement and supply chain management is very important as the supply chain starts from procurement.
In larger businesses, demand aggregation is often used to bring efficiency in procurement and sourcing. In smaller businesses however, procurement, sourcing, and purchasing may be overlapping functions, often managed by the same team.
The team/person responsible for procurement usually has following responsibilities:
- Procuring required quality raw material or components.
- Forming a strategy with supplier to ensure regular inflow of raw material.
- Inventory management.
- Quality check of the received raw materials.
For example, if you are an auto component manufacturer, it is important that the procurement team works along with the product development team to set standards for procuring quality raw material. Once the quality is determined, procurement team will ensure required quantity, get quotes from suppliers, negotiate and place an order.
Keeping an eye on inventory and placing further orders is also the procurement team’s responsibility.
What is logistics?
Logistics activities include transportation, warehousing and other value-added services such as packaging and labelling, required in the movement of good from the factory to customers and sometimes return. Often, logistics function is outsourced to 3PL companies, that have expertise in carrying out logistics tasks.
Responsibilities of logistics team/personnel involves following:
- Physical distribution of products.
- Ensuring availability of products in the market through right channels.
- Making sure products are transported, stored and packaged in safe conditions.
- Specific temperature or humidity is maintained during transportation and storage of specific goods.
- Ensuring efficiency in reverse logistics, whenever required.
- Attaining equilibrium between logistics cost and efficiency.
For example, you are a tea manufacturer. The scope of your outbound logistics department revolves around managing shipments in the market, evaluating demand and making sure availability of your tea in those markets, etc. Moreover, you also need to ensure that the tea pouches or jars reach the market safely without any damages and spillage.
Logistics vs procurement
As mentioned before, logistics and procurement both are extremely crucial activities in the supply chain. To better understand the difference between the two, here is a quick snapshot of how logistics and procurement are different:
|It is an initial step of the supply chain. Starts with procuring raw material/components for manufacturing.
|It come at the later stage of the supply chain when movement of product either inbound or outbound is required.
|It generally pertains to inward flow of goods.
|It generally pertains to outward flow of goods. However, if logistics is done for procured good, it is called procurement logistics.
|It includes various functions such as getting quotes, placing an order, purchasing items, receiving and then conducting quality checks, etc.
|It includes functions such as transportation, warehousing, packaging and so on.
|Supplier is the starting point and procurement person’s job ends when material enters the manufacturing process.
|The end destination is the customer/distributor or internal unit, as applicable.
|Procurement personnel is responsible for sourcing right quality of raw material.
|Logistics personnel is responsible for maintaining quality of the finished product during transit.
Together, procurement and logistics are challenges every business, irrespective of size encounters. At Tata nexarc, we aim to enable MSMEs in India find easy, reliable solutions to their challenges and grow their business.
Tata nexarc’s Procurement enables you to find and buy raw materials online (especially steel products including steel coils, galvanised steel, TMT bars, etc.). You get the best rates and don’t have to struggle to search for trusted suppliers. And, to ease the challenges of logistics management, Tata nexarc offer Logistics. We have partnered with top logistics companies in India and help with transportation of goods at affordable prices across 19000+ Indian PIN codes.