Week 7: Logistics Management and Purchasing and Supply Management

QUESTION

Week 7: Logistics Management and Purchasing and Supply Management

Based on your experience or readings, discuss the interface between Purchasing and Supply Management and Logistics Management – specifically with respect to selection of a third-party logistics provider, analysis of the total cost of ownership, use of e-procurement capability, integration of the transportation (in-coming and out-going) spend, and management of just-in-time inventory control. How do Purchasing and Supply Management and Logistics Management “fit” within the framework of distribution management – particularly control of in-process and finished goods inventory? What is the role of Purchasing and Supply Management and Logistics Management professionals in the implementation of a supply chain management strategy?

ANSWER

Logistics and Supply Chain Management

A complex relationship exists between Logistics Management and the larger Purchases and Supply Management. Most people view the two as departments that do the same function, but logistics may be looked at as a constituent of Purchases and Supply Management. Logistics refers to control and management of the movement or transfer of goods between the different supply chain players: company branches, warehouses, and outlets (Bowersox, Closs, Cooper, 2002). Purchases and Supply Management involves several other functions such as procurement, outsourcing, partnership relations etc. It is also tasked with the job of third-party logistics providers, inventory control, and transport costs integration with logistics providers.

The decision on third-party logistics providers lies upon the Purchases and Supply Management, as this department manages information and goods movement within the players in the market. The logistics providers are managed similarly to suppliers, with contracts and costs being negotiable. They should be properly managed to control shipping and warehousing costs of a business. The Purchases and Supply Management also negotiates the cost of goods and manages the delivery time of products (Cooper, Lambert, Pagh, 1997). Therefore, a company’s Supply and Purchases team works closely with contracted third-party logistics providers to make sure that delivery time of goods is met, and the distribution of finished goods and inventory is carried out in a manner that will satisfy the requirements of the company. Any in-process inventory is managed by the Purchases and Supply Management. However, finished goods distribution is managed by the logistics providers, who report to the Purchases and Supply Management. Inventory may also be transported to the company using the services of a logistics provider. The cost of this delivery shall be paid when the finished goods are sold, after processing.

Supply Chain Management Strategies are employed to achieve the proper conditions for a company to achieve an efficient distribution of its products, throughout the target market, at an efficient cost (Frazelle, 2002). The strategy factors in available knowledge and resources, to plan for the supply of a certain commodity (produced by the company) to its customers and avoid any shortages and delays. The Purchases and Supply Chain Management comes up with their preferred strategy and spells it out to the logistics providers to train them and incorporate their way of distributing goods, to meet the target of the stipulated strategy. The involvement of the third-party logistics team in the Supply Chain Management Strategy creation and utilization is beneficial to a company, as it minimizes the eventuality of misunderstandings between the two groups (Cooper, Ellram, 1993).

References

Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2002). Supply chain logistics management   (Vol. 2). New York, NY: McGraw-Hill.

Cooper, M. C., Lambert, D. M., & Pagh, J. D. (1997). Supply chain management: more than a new name for logistics. The international journal of logistics management, 8(1), 1   14.

Frazelle, E. (2002). Supply chain strategy: the logistics of supply chain management. McGrraw Hill.

Cooper, M. C., & Ellram, L. M. (1993). Characteristics of supply chain management and the implications for purchasing and logistics strategy. The international journal of logistics management, 4(2), 13-24.