Value For Customers. Procurement refers to the process by which a firm derives the greatest possible value out of its financial resources. This means doing all that is necessary to obtain the maximum return on investment and then passing on the resulting value to the customer. Procurement entails developing a long term strategy for purchasing needs and supply chain management, which consists of finding a reliable source for suppliers, developing appropriate market research, examining the value provided, and ensuring quality of the supplied goods. Many firms have elaborate buying procedures because they think that their buying requirements are too complex, but that is not necessarily the case.
Value Creation. Value creation occurs when the firm establishes its own unique position in the market by producing goods that meet or exceed the needs of customers while costing less than competitive prices. The concept of value creation is central to strategic planning, as it implies that a firm can increase its productivity by using its existing resources in a way that gives it a competitive advantage. For example, by making use of its extensive warehouse capacity and leveraging its purchasing and production capabilities, a firm can reduce costs and improve profitability. To do this, logistics plays a key role.
A good logistics provider helps a firm to establish a strategic and efficient supply chain management process that results in maximum flexibility for inventory and delivery. It also helps in improving company profitability by reducing costs associated with transportation, product quality, and error. A logistics provider must be able to provide adequate transportation services, complete with warehousing facilities, at the right time, to meet the demands of a customer. It should also have the capability to deliver products on time, within a specified delivery period, to meet budget requirements. Last, but not least, a logistics provider must have the capacity to maintain the integrity of inventory systems, to spot potential problems before they occur, and to ensure that deliveries are made on time. By following these principles, a business can ensure that its products reach the customers at the right time and in the right quantity.