Procurement and logistics are key to any cost reduction programm .60-65% of product costing
involves these two important areas .

A  dynamic supply chain  management  covers following  subjects

Distribution Network Configuration

Inventory Control

Supply Contracts

Distribution Strategies

Supply Chain  Integration  and Strategic Partnering

Outsourcing and Procurement  Strategies

Product Design

Information  Technology -Decision support  system

Procurement. :

Companies has  to develop a effective strategies to get best value from procurement .Every purchase
executive or professional has to perform following action.

  • Negotiations
  • Selection of  vendors
  • Monitoring Inventory
  • Records and documentation
  • Vendor Evaluation &analysis and ranking
  • Price trends
  • Alternate sources and vendor relationship
  • Imports

Logistics :

It covers inbound and out bound   transpotation and freight  cost . Costs are involved in bringing raw
material to the factory from vendors  ware house  , ports & air port s. It could be either  by the vendor
itself or by own transport fleet .It covers material movements as work in progress ( WIP) and  
Finished  goods .

Finished goods have to  be shipped to  dealers warehouse  , port or airport  .From warehouse to
retailers and finally to consumer . Entire  chain Important for the business .

Transportation involve  following  method

1. Rail      2. Road      3. Sea    4. Air

Cost of freight are calculated on basis of  wt , volume, distance and containers .Logistic personnel
has to select variuos options  for cost reduction .


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