Procurement

Procurement is defined as the action of obtaining something. In a business sense, this relates to making purchases of goods and supplies that are required by the company in order to operate. Procurement is needed so that a business can buy the materials needed to manufacture goods, run efficiently and meet the needs of customers. A company will need to get the right assets at a fair price in order to make the most money possible.

Relationships with suppliers

Businesses do not only form relationships with suppliers, they also make them with a large number of other companies that supply the goods needed to run efficiently. These relationships are usually very well established and run for a long time, so a large number of factors are needed such as:

• Trust – the trust built between two companies in procurement will be developed over a long time. Some companies work together for decades and both will rely on the other to respect the relationship that is built. If a business has no trust in a supplier, it may run the risk of being let down or sold substandard products. In order to build a long-term relationship, both the purchasers and suppliers of goods need to recognise that what is good for one business is also good for the other.
• Quality – when making purchases, a business must ensure that what it buys is the best quality possible. These goods could be used in manufacturing processes to ensure products are a better quality within a company to run more efficiently or sold on for a profit.
• Availability – some businesses will need to be able to order the products and get these as soon as they need them. A supplier that does not have items when needed will continuously let down its customers so a business will have to choose one that has good stock levels in order to avoid being let down.
• Delivery – getting goods quickly and easily is very important in modern business. A business will want to buy goods that can be obtained quickly so that it will not have to wait for vital resources.
• Cost – in order to make the most money, a business will need to look into the cost of products that it buys. Ensuring that supplies can be sourced at a low price will help the company to lower costs and therefore make more money on each item made and sold. If the costs for products are very expensive then the business may struggle to turn a profit.

Logistics and the supply chain

When supplying goods to a company it is essential that this can be done efficiently and in a timely manner. This relies on a supplier investing in the right tools to ensure packages can be sent out easily to clients all over the country. The process of supplying, moving and storing goods in a number of different locations is called logistics and is closely linked to the supply chain.

The entire process of getting goods from natural resources to the end user is known as the supply chain. This process can have a very large number of links where goods are bought, sold and adapted by various businesses. Supply chains can be simple, where only a couple of businesses are involved, or very complex with many suppliers and manufacturers being involved. The decisions made in the supply chain will have a huge impact on all users further down the chain. This could potentially change the prices of products, the quality and even the features of goods.

In logistics, goods should be readily available and dispatched quickly. Most modern logistics companies are now very efficient and offer a next day dispatch as customers have become much less patient. If a client does not want to wait around for goods to be delivered, then logistics companies should have a wide location that they cater for with strategically placed warehouses. This will cut the waiting time for goods by a huge amount as goods can be sent to a customer from a location that is fairly close by.

Logistics and the supply chain involve shipping goods throughout the world. This work requires a huge number of strategies to do it efficiently. Logistics is a massive industry. It is estimated that the logistics industry is worth £55 billion, comprises 5% of our GDP and employs around 1.7 million people in the UK alone