Procurement

In your view discuss why procurement and controlling manufacturing inventory are raw materials management activities and why order processing and customer service are physical distribution management activities.

The management of the flow and storage process between the point of origin of raw materials and the point where materials are converted into finished goods is known as materials management (inbound logistics). The management of the flow and storage of finished goods between the final point of manufacturing and the point of consumption is known as physical distribution management (outbound logistics).

Procurement management is the function responsible for the interface with suppliers. Procurement management has to ensure the business gets the right quantity of goods and services at the right time, at the right place, at the right price, to the right quality specification and from the right sources.

• Improve competitive position

• Provide uninterrupted flow of goods/services

• Minimise inventory investment and loss of revenue

• Maintain and improve quality

• Find/develop best suppliers

• Standardise (where appropriate) inputs

• Aim for lowest TCO

• Achieve co-operative, productive internal relationships

• Accomplish procurement objectives efficiently and at lowest operating cost

Procurement management needs to ensure the efficient and effective sourcing of the inputs needed to conduct the business. In order to fulfil this procurement should identify and exploit opportunities to ensure uninterrupted flow of inputs to support the business’s operation. These inputs may be raw materials that are needed as feedstock for the products the business produces, finished goods as marketing inputs if the business purchases items for resale, and capital goods needed to equip and support the business’s management and other secondary activities.

Inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale. A key function of inventory management is to keep a detailed record of each new or returned product as it enters or leaves a warehouse or point of sale.

Raw material management is critical to the overall