•The procurement operations are identified as inbound logistics.
•International procurement often requires large shipments necessitating the use of barges, ocean going vessels, trains and multiple truckloads for transportation.
•The lower value of materials and components as compared to finished product implies greater trade-off between higher cost of maintaining inventory in transit and the use of low cost modes of transport.
•As the cost of maintaining inventory in the pipeline is less per day than the cost of maintaining finished inventory, there is no benefit for paying higher freight rates for faster inbound transport.
•Procurement performance cycles are invariably longer excepting in those cases where the value of material or component may justify paying higher freight rates for faster inbound transport.
•A critical issue in procurement is uncertainty in respect of price change, and/or supply discontinuity.
4 Comments