Supply Chain Management: Procurement and Logistics

Supply Chain Management

Effective supply chain management ensures product availability in the required quantity and quality, at the right time, and under optimal financial conditions. It involves three key functions:

Core Functions

• Purchasing: Acquiring necessary raw materials, products, and/or services in the right amounts, timing, quality, and at the lowest cost.
• Storage: Ensuring timely access to items in adequate quantities and qualities.
• Inventory Management: Maintaining optimal stock levels to maximize service and minimize costs.

Purchasing Decisions

Key parameters considered in purchasing decisions:

Decision Parameters

• Quality: Product characteristics ensuring suitability for intended use.
• Price: Total cost of the purchased product, aiming for the lowest cost while maintaining quality and service.
• Lead Time: Time from order placement to warehouse delivery.
• Quantity: Acquiring the necessary quantities to maintain minimum stock levels.
• Supplier Service: Benefits offered by the supplier.
• Payment Terms: Negotiating favorable payment terms to improve company liquidity.

Purchasing Process

The purchasing process involves several stages:

Process Stages

1. Problem Recognition: Identifying a need solvable through purchasing.
2. Specification: Defining required product features and quality.
3. Supplier Search and RFP: Identifying potential suppliers and requesting proposals.
4. Bid Evaluation: Assessing proposals and selecting the most suitable.
5. Purchase Decision: Negotiating terms and placing the order.
6. Purchase Monitoring: Evaluating supplier performance and product satisfaction.

Purchase Documentation

Key documents in the purchasing process:

Documentation

• Purchase Order: Buyer's request for merchandise with specified price and terms.
• Order Confirmation: Supplier's acknowledgment of the order.
• Delivery Note: Supplier's confirmation of goods shipped.
• Complaint Letter: Buyer's notification to the supplier regarding discrepancies.
• Invoice: Seller's document detailing the sale.

Payment Methods

Various payment methods and related documents:

Payment Options

• Cash: Payment upon delivery.
• Deferred Payment: Payment after delivery.
• Check: Payment order drawn on a checking account.
• Receipt: Seller's confirmation of payment received.
• Bank Transfer: Electronic transfer of funds.
• Postal Order: Payment through postal service.
• Bill of Exchange: Written order to pay a sum at a future date.
• Promissory Note: Written promise to pay a specific amount.