Supply Chain Management vs. Procurement
There are a lot of terms involved in the supply chain. Terms like kitting and product fulfillment services, reverse logistics services, and procurement process, are commonly used in this industry. But what do these terms refer to? What is supply chain management and what is the procurement process? Here are some important things to know about these two terms and what their major differences are. Once you understand what these terms mean, you will be able to benefit from the many tips and services available to you when you partner with a third-party logistics (3PL) team in Toronto.
How Is Procurement Different from a Supply Chain?
Every agent involved in getting your product into the hands of a customer or end user, is known as part of a supply chain. This process involves raw material suppliers or gatherers, manufacturers, transportation companies, wholesale warehouses, in-house staff, stock room workers, and cashiers. To make the supply chain run smoothly, functions such as quality control, marketing, procurement, and sourcing must be involved. The supply chain is the entire process, while procurement is a part of it.
Procurement is defined as the process of getting the products and/or services your company needs to fulfill its business model. The procurement process involves several tasks including developing standards of quality, negotiating prices, financing purchases, buying goods, inventory control, and the disposal of waste products. Once your company has possession of the goods, procurement stops. For companies to profit from this process, the cost of procuring products must be less than the amount the products can be sold for, minus the processing and selling costs.
Supply Chain and Procurement: How Do They Work?
The supply chain refers to all of the moving parts from the time a product leaves the manufacturer to when it arrives on a customer’s doorstep. Supply chain management activities are all efforts made to improve efficiency and effectiveness across all stages along the way. It covers matters such as when products are distributed, material sourcing, manufacturing quantity, quality testing, product storage, and so much more. Outsourcing your supply chain services allows you to avoid many errors in the system, because you are leaving all of the nitty-gritty duties to the professionals. These outsourced companies provide effective supply chain management by making sure orders are filled quickly while limiting errors along the way; tracking, maintaining, and organizing data to make the process works smoother each time; and getting the product into the customer’s hands faster. Procurement is just one of the many roles involved in a good supply chain. It should be considered a core component of a company’s corporate strategy. Proper procurement management is vital because an organization can end up spending over half of its revenue on purchasing goods and services. Procurement makes a huge difference between the success and failure of a business. The procurement process includes the following steps:
- Identifying requirements
- Approving the request for purchase
- Finding suppliers
- Making inquiries and receiving quotations
- Negotiating the terms
- Making a final selection of the vendor
- Creating a purchase order and goods receipt
- Shipping management
- Receiving invoices and making payments
Get Supply Chain and Procurement Services at LSS
If you’re looking for procurement and supply chain services, Lean Supply Solutions can help you. We stay up to date on current trends in the industry and adapt ourselves to be more efficient for our clients. Our third-party logistics, packaging, and supply chain management services can streamline your processes for better success. By striving to ensure that the right products are provided to the right customers at the right time, Lean Supply Solutions is able to offer consistent, accurate, and quality results. To learn more about outsourcing to our 3PL distribution team, or to ask any questions, contact us at 905-482-2590.