According to research by professional services network Pricewaterhouse Coopers, businesses with optimal supply chains have 15% lower supply chain costs. As such, tweaking variables within your supply chain can achieve benefits beyond simply ensuring goods are sourced on-time and within budget. Effective supply chain management can lower your cost base – influencing your overall profitability. Indeed, a study by Deloitte found 79% of companies with high-performing supply chains achieve higher growth in turnover than the average for their industries.
Yet when it comes to supply chain costs, many organisations take a short-sighted approach which focuses solely on product costs. Yet, even if you source products at the lowest possible prices, the savings could quickly be eliminated if logistics costs are not kept under control. To avoid this pitfall, organisations must take a holistic approach to their supply chain. This includes assessing whether supply chain logistics are affecting their cost base.
So, where does procurement end and logistics begin? Broadly speaking, supply chain management comprises two interrelated components: procurement and logistics. Procurement primarily focuses on specifying requirements, sourcing goods/services to meet those requirements, then negotiating the best possible price. From here, logistics focuses on the movement, storage, inventory management and delivery of products from their source to the point of consumption. To achieve value within the supply chain, these two areas must work in unison.