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Procurement vs Logistics: The Money and the Movement  

warehouse worker standing in the center aisle
Last Modified: July 26, 2022
Understanding different parts of the supply chain system helps individuals and companies build better operations. Take a dive into procurement and logistics differences to get started.
Natalie Kienzle
July 15, 2022
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A full breakdown of procurement vs logistics would reveal a great number of common elements. 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. It’s important to understand the relationship between procurement and logistics in supply chain. 

Procurement is the practice of finding vendors, securing raw materials, and arranging purchases. The goal is to make sure a company has everything it needs to produce and distribute a product long-term. Logistics covers the processes that make it possible to transport, store, manufacture, and distribute the final products. 

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

Procurement vs Logistics: Is There a Difference?

To figure out procurement and logistics, you need to know how they overlap and why. Logistics is often a general term for anything involving product movement, including purchasing

Since logistics is so broad, more vocabulary has developed to better define specific aspects. For example, most businesses will distinguish between inbound logistics and outbound logistics. This is because they affect different parts of a business. 

The best way to identify procurement is to look at which distinct processes are often involved. 

A procurement specialist works in 

  • Finding source materials
  • Purchasing supplies and raw material
  • Negotiating supplier and vendor contracts for goods or services
  • Quality control management
  • Securing ongoing support services (especially for software)
  • Managing long-term relationships and contracts
  • Finding new supply markets

For a single procurement specialist or team, that’s quite a bit. The bigger the company, the more complex procurement and sourcing are. Saying that procurement is only the process of acquiring goods is a gross understatement. 

Smaller companies that are trying to expand are likely to have employees that perform more than one duty. Someone in charge of procurement might be responsible for arranging transportation and storage. These are responsibilities that fall more under a logistics management umbrella. 

This doesn’t change the fact that procurement and logistics are two separate activities.  

procurement vs logistics as workers review info on a tablet

Is Procurement Part of Logistics?

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 simple terms though, procurement is only a part of a greater logistics whole, specifically inbound logistics.

The logistics team working with procurement services handles

  • Local short-term storage
  • Freight broker or carrier negotiations for shipping
  • Applying for freight insurance
  • Applying/confirming necessary permits or customs documents (if shipping internationally)
  • Filing claims for damaged or lost goods
  • Warehousing arrangements
  • Arranging delivery and final mile services of finished goods
  • Any other value-added services unique to a company

Some of the above responsibilities might be considered part of outbound logistics. That is the part of the business that connects directly with customers. Either way, the focus is on the physical movement of goods and services. 

When you compare the responsibilities, the differences between procurement and logistics become clear. Each specialty comes with unique challenges. 

shrink wrapped pallets waiting in a loading bay

What is the Role of Procurement in Supply Chain Management?

Supply chain management doesn’t exist unless there are actual supplies - hence the name. Procurement makes supply chain management possible.

Whether your company is offering physical goods or some form of digital service, supplies play a part. When a procurement manager is doing the job right, supply chain management knows what supplies are available or still needed.

Supply chain management tries to balance supply, production, and demand. Too little or too much in any of those areas is bad for business. 

This makes communication between each area important. When demand for a product starts going down, it makes sense to ease up purchasing the raw materials needed for it. If that information isn’t communicated, you might end up with a warehouse full of obsolete merchandise. 

Supply chain managers are in place to ensure that communication happens. Having the big picture in mind, they can use strategies in each sector to improve overall company performance. 

This would include 

  • Ways to reduce shortages and overages
  • Keeping extra costs down
  • Managing the flow of all goods coming in and out
  • Ensuring ethical and sustainable business practices at each level 
  • Quality assurance across all finished products

Even though procurement is only a part of the bigger picture, it doesn’t make it any less necessary.  

Improving the Procurement and Logistics Process

Procurement and logistics can still work independently to improve processes to serve a company as a whole. Departments can streamline their actions and make it easier to study the big picture. . 

What is that like on the procurement side? It’s about finding ways to work smarter and use the best resources. 

Best practices in procurement include:

  • Standard order policies: Set up a system to process all orders the same way. Mistakes are easier to find and new talent is easily trained.  
  • 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.
  • Simple sourcing strategies: Make it easy for new suppliers to present bids and showcase materials. Procurement and mystery do not make good partners. 
  • 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. 

Finding supplies and materials is challenging. Many companies are learning the hard way that single-supply sourcing can fall apart easily. Even when supplies are found, a lack of logistical support makes it impossible to get them anywhere. 

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. 

There are some areas in procurement that still benefit from a little bit of specialized attention though. 

Truck and car stalled out on flooded highway

Dealing With Disruptions

Whether your company operates on a global or domestic scale, planning for disruption has taken on new meaning.

Some disasters, like the Covid-19 pandemic, came out of nowhere and there really was no planning for it. It is possible to prepare for other types of natural disasters to an extent, even abrupt ones like earthquakes. The same goes for cyberattacks and even political unrest.

A team working on supply knows how quickly it can be disrupted and what is likely to do so

  • Severe winter storms in Texas and Louisiana interrupted major polyethylene resin manufacture. As a result, 60% of manufacturers are now reporting shortages and prices have gone up between 30% - 50%. Supply Chain Dive
  • A shortage of semiconductors needed for vehicle manufacturing impacts production numbers. Vehicle shortages are estimated to have cost the auto industry about $210 billion in revenue. Alix Partners
  • Conflict in Ukraine has disrupted neon gas production needed in semiconductors and driven prices up nearly 600%. Before the conflict, 50% of the world’s supply came from there. Reuters
  • Wildfires and mudslides in the Pacific Northwest created interruptions in lumber processing and shipping. Prices jumped 186% in early 2022 as a result. Fortune

These events, and many like them, continue to disrupt a global supply chain still attempting to recover from Covid-19 effects. The increased frequency has procurement teams figuring out creative solutions. 

Emergency procedure plans, as mentioned before, can help manage disruptions so that you don’t lose valued customers.  

  • Track seasonal disasters: Hurricanes and typhoons are common during hot summer months. Wildfires and droughts also have seasonal highs. Maintain a solid relationship with alternate sources during these times. 
  • Clear responsibilities: Have a specific plan ahead of time for what each of your team members needs to do. One might be reaching out to alternatives while another takes the time to check in on regulars. 
  • Find the weakest link: Before disaster strikes, analyze which part of the procurement or logistics process is most at risk. Stocking up on certain materials you don’t have alternate suppliers for is a valid strategy.  

When clients see purposeful actions from companies after a disaster, it sends a good message.  You can’t control when a disruption to your supply chain will happen, but you can control how your company reacts. 

Looking for a solution to store and ship your products seamlessly? Let R+L Global Logistics be your fulfillment and distribution partner.

Working With Raw Materials

If your procurement team works with raw materials, you know that some are easier to get than others. Sometimes, it isn’t about how common it is, but how much demand exists. 

Shortages in raw and base materials affect output in other industries, too. One study showed that 89% of procurement managers said they were short on raw materials. The industry breakdown is below and shows how some have been more impacted than others. 

Industries Reporting Raw Material Shortages

Manufacturing49%
Mechanical Engineering16%
Automotive11%

When shortages are high, prices go up. According to the same study, most companies end up passing those costs along to consumers. In turn, they lose consumers because of higher pricing. It becomes a challenging cycle that procurement teams need to manage carefully. 

Getting the best deals possible on what raw materials are available has an impact on final product pricing and selling. Procurement specialists using demand planning can help. 

It does mean keeping an eye not just on market demand, but supplier behaviors. Supply and demand is easily impacted by world events. Predicting outcomes is possible with study long-term experience. 

Looking for a solution to store and ship your products seamlessly? Let R+L Global Logistics be your fulfillment and distribution partner.

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 Services, powered by R+L Global Logistics, has decades of experience. It also has the reach to make it work for you. With warehouses all around the country, we can store, cross dock, or transload your supplies almost everywhere. 

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

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