Procurement
The acquisition of goods and services at the lowest possible costs is known as procurement. The ownership of the services of goods should be in the right quality and quantity and at the right place. Procurement encompasses the acquisition of goods from the right source to be of direct benefit to an individual a corporation. Therefore, it involves the gathering of all resources that a company needs. Purchasing decisions such as marginal benefit, handling, delivery, and facilitating of prices are the decisions to be made when procuring. This is because procurement is about the decisions to be made when purchasing the needed resources that are scarce. A good data is essential in analyzing the market by the use of cost-utility analysis or cost-benefit analysis method. The aim of the analysis is to make decisions depending on the presence or absence of risks. A concept that can be applied in case of a risk in the benefits or costs is that of expected value.
There are two types of procurements. There is the indirect and direct procurement. The direct procurement is about production goods and raw materials while the indirect procurement is about the operating supplies, repair and maintenance. Direct procurement only happens in a settting that deals with manufacturing. Direct procurement deals with the management of supply chain which is directly reflected on a manufacturing firm process of production.
James Stock and Lambert Douglas in their book Strategic Logistics managementhave discussed the growth that has happened in the management of supply chain. The book presents notable changes that are currently occurring in the global market in aspects like e-commerce and after the development of the Internet. The authors discuss on the widespread technology in the information sector and the explosion of computers. This has enabled of 24 –hour market development to the satisfaction of consumers. Global logistics strategies have been developed by trade agreements formed by corporations such as the European Union, North America Free Trade Union, Marcouse and ASEAN. Apart from these aspects, the authors included the changes brought about by new technologies and information in the state-of-art logistics. Marketing aspects in logistics have been emphasized by the authors along side the essential aspects in Business.
Aspects of logistics are incorporated into the supply chain management by the authors. The book gives an up to date information of supply chain management in areas of transportation, global coverage and technology. Procurement, according to the authors is the ownership of goods and materials by the consumer in the lowest transportation cost and at the right condition, place, product, and time and at the right price. The product should be the preferred product of the consumer and not the substitute. This means that transportation is a vital component that contributes to the total cost (Stock, & Lambert, 2000, p 12).
Logistics management covers information and product flow among and between firms. This activity is the fundamental in place utility and adding value of time features and utility of place (Ballou, 1999. Lambert, Stock & Ellram, 2001, p 454). According to the scholars, logistics has the responsibility for transportation outbound, warehousing, inbound transport, intra company transportation, handling of material and control of inventory.
Governmental organizations are currently utilizing transportation with the aim of setting a different objectives and goals that guide in decisions making in the management of transportation. It is also with the purpose of supporting change in the larger society. The management of efficiency and effectiveness of transportation depends in the understanding of consumer’s objectives and goals.
Inventory is what links logistics and transport management. Logistics is the management of inventory while transportation is the movement of inventory. The major goal of transportation management is carefully managing the in inventory. Transportation service providers are capable of disusing the impact which transportation on logistics as a whole. Stock and Lambert discuss the relation between the changing costs of transport on four given factors. These factors are inventory, carrying costs, size of order and inventory cost (Wadringer, 2001, p 134).
A business must first begin by understanding inter modals transportation by sharing information with the supplies as seen in business sharing and configuration; Values-Vision-Mission-Goals-Strategies- Critical-Asset -Performance indicators and the system of the business that are the people, and information and implementation process.
The current interaction and dependence of firms has made logistics activities to become difficult due to the intensification of supply and delivery (Cohen, 2000, p 26). This challenges creates new demands in the management of logistics. This means that new methods and approaches have to be implemented by managers to deal with processes of logistics.
Procurement deals with the management of logistics in tackling complications and difficulties that cause logistical problems (Christopher 1998, p 54). Handling these complications is based on tackling mechanical assumptions by distinguishing the problems, analyzing, and solving each individually.
Reference
Christopher, M 1998 logistics and supply chain management, UK Biddle ltd.
Ballou, R (1999) Business logistics Management, International EDN, New Jersey: Prentice –Hall Inc.
Wadringer, J (2001) Complexities in transportation and logistics systems. A conceptual Approach to modeling analysis, Report 53, Chalmers University of Technology.
James R. Stock, Douglas M. Lambert (2000) Strategic Logistics Management. 4th ed.. McGraw-Hill Irwin Pub.
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