Procurement vs Logistics: Differences Within The Supply Chain  

 For some organizations, a procurement team and a logistics team are one and the same. In others, they’re related partners that rely on each other’s skills and services. Whether one or the other, they serve vital roles in a business’ supply chain. 

Key Takeaways: 

• Procurement is the practice of finding vendors, securing raw materials, and arranging purchases. 
• Logistics covers the processes that make it possible to transport, store, and distribute the final products. 
• Improving processes in procurement and logistics reduces disruptions and enhances operational performance.
• Third-party logistics (3PL) providers can help businesses streamline these functions for better scalability and growth.

Gain an understanding of these practices and how they work within a supply management system. 

What is the Difference Between Procurement and Logistics?

To figure out procurement and logistics, you need to know how they overlap and why.

Procurement is actually a process that covers the search, purchase, and shipment arrangements of materials and goods for a business’ use. 

A procurement team will focus on things such as:

• Finding source materials
• Purchasing products and raw material
• Negotiating supplier and vendor contracts 
• Quality control management
• Securing software support services 
• Managing supplier relationships and contracts

For a single procurement specialist or team, that’s quite a bit. The bigger the company, the more complex procurement and sourcing processes are. 

These are all responsibilities that fall more under a logistics management umbrella. However, this doesn’t change the fact that procurement and logistics can still be defined separately.  

Logistics is a general term used to describe anything involving product movement, such as shipping, storage, and fulfillment. 

Logistics teams are multi-faceted and require experts in areas such as:

• Freight management
• Transportation services
• Warehousing and storage
• Customs compliance (when working internationally)
• Final mile services

Since logistics is so broad, it’s necessary to define specific aspects and unique processes. For example, distinguishing between inbound logistics and outbound logistics.  It’s as part of inbound logistics that we encounter procurement.

When it comes to the role of each within the supply chain, the easiest way to distinguish them is by noting what makes them different. 

Procurement As Part of the Supply Chain

The term procurement logistics sometimes gets tossed around too. We’ve already established that they are separate activities. Why the term then?

The term procurement logistics places sourcing and purchasing within the greater category of supply chain management. 

In this context, procurement processes are those specific to inbound logistics.

Realize that supply chain management doesn’t exist unless there are actual supplies, at least when it comes to your specific part in the chain. Procurement is what starts you off. 

As such, it’s also what impacts every link that comes after. The quality of your procurement, from vendor selection to warehouse receiving, influences other supply chain activities, including: 

• Warehouse organization
• Dock to stock
• Filing claims for damaged or lost goods
• Demand planning
• Customer satisfaction

Supply chain management tries to balance supply, production, and demand. Too little or too much in any of those areas is bad for business. When a procurement manager is doing the job right, supply chain management knows what supplies are available or still needed.

How Logistics Supports Procurement Processes

For procurement processes to remain effective, logistical support is needed. Once goods are found and purchased, there’s still the matter of getting them to their destination. 

Since logistics is focused on the movement of goods, it helps by providing the following services:

• Negotiations with carriers for shipping rates
• Providing warehouse locations
• Overseeing needed customs documents
• Inventory management systems

In a small business, many of these responsibilities will overlap. As a business grows, however, needs often become more specialized to better manage increased quantities. Without the right support systems in place and experts to manage them, companies may be left dealing with:

• Product shortages
• Hefty shipping fees
• Customs holds
• Lost and damaged materials

If you’re already dealing with these issues, then it’s time to take a look at how to improve both processes and what challenges you’ll face. 

Improving the Procurement and Logistics Processes

Improving logistics processes, and by extension your procurement, comes down to recognizing what causes the most disruptions and finding ways to mitigate the effects. Avoiding all disruptions may be impossible. 

The goal is to focus on best practices that minimize how often they occur and make your supply chain management flexible enough to survive the issues that can’t be avoided.

Best practices that help procurement specifically, and logistics in general, include: 

• Standard order policies: Set up a system to process all orders the same way. Mistakes are easier to find and support services know what to expect.  
• Build strong supplier relationships: A standard order doesn’t mean standard treatment. Even a basic personal relationship with contacts contributes to a sense of trust and loyalty. It may also keep your company in the loop as to potential issues that may affect your orders.
• Simple sourcing strategies: Make it easy for new suppliers to present bids and showcase materials. This will also help diversify your suppliers so you aren’t overly reliant on one. 
• Central information hubs: Keep important information in one place that’s easy to access. One way to achieve this is through an Enterprise Resource Planning (ERP) system.   
• Tracking Key Performance Indicators (KPIs): Figure out which data points best reveal your company’s practices. Track growth areas and have a baseline for setting future goals.  
• Emergency procedure plans: You can’t prevent disasters, but you can plan for how you deal with them. A list of alternate suppliers and routes, and customer follow-up communication makes a difference. 
• Investing in demand planning: Use your data wisely and take time to examine market trends to better predict peaks for better resource allocation and inventory management. 

Finding supplies and materials can be challenging. Many companies have learned the hard way that single-supply sourcing can fall apart easily. 

A procurement team needs to think creatively and more globally than ever before. Clear communication, good training practices, and standard policies help keep things on track. 

Smooth Out Supply Issues with Fulfillment & Distribution Services

The battle for better procurement and logistics services is more intense than ever. As prices of materials and shipping rise, you need a support team that knows how to call the shots. 

Fulfillment and Distribution has decades of experience. It also has the reach to help you make your business succeed no matter where you’re located. 

Our diverse service offerings include: 

• 3PL warehousing
• Reverse logistics
• Retail fulfillment
• And More

Call us today at (866) 989-3082 to speak with one of our fulfillment specialists directly. If you need answers fast, request an online service quote today. Better supply chain management is within your reach.