78 4.3 Managing Logistics and Transportation


By the end of this section, you should be able to:

1.  Describe the logistics decisions, which are related to Procurement.

2.  Identify the advantages and the disadvantages of various modes of transport.

3.  Identify the freight terms of transportation.

4.  Describe how to select and evaluate the most appropriate transportation made for specific goods.


Purchased goods must be shipped from the point where they are produced to the place where they are needed, with inventories held at minimum quantity, to ensure production and customer service. In traditional system, inventory management is responsibility of manufacturing function. However many multinational companies have moved to just-in-time (JIT) manufacturing, which involves scheduling receipts from suppliers so that deliveries occurs just as the materials or components are needed in the manufacturing process. Manufacturing then produce the end product by the customer’s ship date. The logistics activity associated with the traditional manufacturing process is one of the most costly components of most manufacturing companies. With JIT system, the logistics cost may be increased further due to the frequency of delivery and movement of inventory. Thus it is important for Procurement to manage the logistics cost associated to its inbound shipment received from suppliers.

This section will only cover the logistics concepts and knowledge, which is related to Procurement function since the detail logistics functions will be covered in other separate courses.



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