Procurement vs Logistics: The Money and the Movement

Procurement and logistics are parts of the supply chain system. Ecommerce sellers often get confused between them and use them interchangeably; however, they are quite distinct. A clear understanding of procurement and logistics can help ecommerce sellers make better business decisions and build robust operations.

What is procurement?

Procurement is the practice of sourcing goods and services such as raw materials, finished goods, and components of products. Procurement is strategically sourcing goods or services that an ecommerce business sells to make profits. Procurement consists of all the steps of sourcing products, such as:

• Finding vendors to source products
• Negotiating prices of raw materials and inventory
• Transporting inventory
• Maintaining of inventory
• Ensuring adequate inventory levels at all times

Let’s understand using an example- you are an ecommerce seller selling jackets. To sell jackets on a marketplace or your website, you need to have an optimal level of inventory. Sourcing the required inventory and transporting it to your ecommerce warehouse, fulfilment centre or storage facility is known as procurement.

What is logistics?

Logistics is the process by which products and transported to reach their destinations. Logistics includes services such as:

• Transporting products among different locations
• Picking and packing of orders
• Shipping orders
• Last-mile delivery
• Managing product returns
• Operating the ecommerce business

To give you an example- you are an ecommerce seller selling jackets. You stock up on inventory through procurement, and when an order is placed- you ship and deliver the order. The part of order fulfilment and delivery is known as logistics. If the customer were to return or exchange the jacket, the process of doing so would fall under the logistics operation.

What is the difference between procurement and logistics?

Procurement refers to the sourcing aspect (before a product is sold) of an ecommerce business. In contrast, logistics are the functions that take place after inventory reaches an ecommerce warehouse. Inbound shipments form a part of procurement; conversely, outbound shipments come under logistics.

Transporting inventory to an ecommerce warehouse is procurement, whereas last-mile delivery of an order is logistics.

What is the relationship between procurement and logistics?

Procurement and logistics are elements of the supply chain system and are interconnected. Products are procured to build an inventory which is then sold on marketplaces, shopping carts or D2C websites.

A smooth arrangement between procurement and logistics can help ecommerce sellers streamline business operations and ensure maximum efficiency.

The two tasks of procuring products and then handling their shipping and delivery can be done by a single team or multiple ones. You can outsource logistics to expert 3PLs (Third-party logistics) like Eshopbox. Irrespective of the method you use, what is essential is synchronization and efficiency among the teams.

For instance- the logistics team should give timely reminders to the procurement team when inventory is running low so that the latter has ample time to negotiate a reasonable price and transport inventory to the ecommerce warehouse.

The more robust your procurement and logistics operations are, the higher the efficiency and cost savings.

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