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
Supply Chain Integration and Strategic Partnering
Outsourcing and Procurement Strategies
Information Technology -Decision support system
Companies has to develop a effective strategies to get best value from procurement .Every purchase
executive or professional has to perform following action.
- Selection of vendors
- Monitoring Inventory
- Records and documentation
- Vendor Evaluation &analysis and ranking
- Price trends
- Alternate sources and vendor relationship
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 .
PROCUREMENT AND LOGISTICS