Procurement logistics deals with the delivery of semi-finished products, materials, parts, sub-assemblies, raw materials, and goods necessary for production, in the right quantity and at the right time. The scope of procurement logistics covers activities ranging from individual supply sub-contractors to points of direct interface with customers. This scope also includes activities related to determining customer demand; ordering, receiving, storing, moving, and rational consumption of goods; maintaining appropriate inventory levels, recording, protecting, evaluating, and controlling them.
An optimal level of supply of goods and services helps a company achieve a competitive advantage over other market participants by optimizing its costs. It also allows for ensuring the appropriate (required) quality created by suppliers in the supply chain. Procurement processes connect successive links in the supply chain, are responsible for acquiring materials, etc., for the enterprise, as well as for the proper and effective execution of a cycle of activities that often cross organizational boundaries.
Logistics management plays a major role here, integrating all activities related to the flow of raw materials, materials, work-in-progress, and finished goods, along with the parallel flow of information.
Procurement systems are complex, and this complexity depends on the type of activity (e.g., a steel producer uses a small number of raw materials, while a car manufacturer needs tens of thousands of different parts). Integrating activities related to the management of logistics processes in an enterprise and linking them with a properly prepared IT system allows for comprehensive decision-making for these types of processes. Procurement logistics should ensure optimal operating conditions for other subsystems (production, services, etc.), which is why IT solutions fulfill very important functions, and their absence makes the proper functioning of enterprises impossible.
To maintain procurement, production, inventory, and warehousing at an appropriate level, it is necessary to use Material Requirements Planning (MRP) methods, which deal with inventory management and production scheduling, and concern especially the supply of materials and parts for production, which depends on the demand for the final product. This is a tool that, by analyzing the master production schedule, allows for the determination of net requirements for inventory in appropriate scheduling units and allows for planning the coverage of this demand according to individual items. In the event of changes in the master production schedule, inventory levels, or product structure, the MRP system allows for taking into account net requirements and ensuring an appropriate level of supply of necessary materials.
To ensure optimal values for parameters related to procurement, warehousing, and an appropriate level of control and coordination of all logistics processes, it is necessary for enterprises to use IT management systems. This is necessary to gain a competitive advantage, maintain an appropriate level of customer service, and reduce the company’s operating costs. These systems can be more or less extensive, consisting of many modules managing individual spheres of activity, ensuring the proper level of data exchange at information inputs and outputs.
The article comes from the magazine “Logistyka” 1/2004.