Procurement, vendors and logistics

Procurement

The purchase cycle: requirement (purchase requisition) → sourcing (find and evaluate suppliers, RFQs) → negotiation → purchase order (PO) → goods receipt (GRN) → invoice matching (three-way match: PO, GRN, invoice) → payment.

Vendor evaluation criteria: price and total cost of ownership, quality, delivery reliability, capacity, financial stability, compliance (GST registration, certifications), payment terms, and responsiveness. Keep at least two suppliers for critical items to reduce risk.

Negotiation: know the market price, volumes and alternatives; negotiate total value (payment terms, delivery, quality guarantees, rebates), not only unit price; build long-term relationships.

Vendor management: scorecards (on-time delivery, quality rejections, price variance), regular reviews, and joint improvement plans.

Logistics

• Modes: road (most domestic freight in India: flexible), rail (cheap for bulk over long distances), air (fast and expensive), sea (international bulk), and multimodal combinations.
• Freight terms: FTL (full truck load) vs PTL/LTL (part load); 3PL (third-party logistics) partners handle warehousing and transport.
• Incoterms for international trade (FOB, CIF, EXW, DDP) define who pays for and bears risk at each stage.
• Documentation in India: e-way bills for goods movement above the threshold value, GST invoices, delivery challans, proof of delivery.

Last-mile delivery

The final leg to the customer is the most expensive and visible part (often a large share of logistics cost). Levers: route optimisation, delivery slotting, dark stores close to customers (quick commerce), cash-on-delivery reduction, first-attempt delivery success, real-time tracking and proactive customer communication. Metrics: cost per delivery, deliveries per rider per hour, on-time %, failed delivery %, RTO (return to origin) rate.

Check yourself

• Explain the three-way match and why it matters.
• When would you choose rail over road?
• List three ways to reduce failed deliveries.