In the world of supply chain management, there tends to be a little confusion where terms like procurement and sourcing are concerned. The terms are related and sometimes used interchangeably, but they each refer to very distinct functions critical to an organization’s operations. Let’s explore the difference between procurement and sourcing.
Procurement vs Sourcing: What is Procurement?
The Art of Acquiring
Procurement, at its core, is the process of acquiring goods and services for an organization. It’s the strategic function responsible for selecting suppliers, negotiating contracts, and managing the purchasing process from start to finish.
Think of procurement as the broader umbrella encompassing various stages—from identifying needs to executing the purchase. It involves planning, budgeting, vendor selection, purchase order creation, receipt of goods or services, and ultimately, payment processing.
Procurement vs Sourcing: What is Sourcing?
The Search for Optimal Suppliers
Sourcing, on the other hand, is a specific aspect within the procurement spectrum. It’s the art of finding, evaluating, and selecting suppliers or vendors to fulfill specific requirements or needs.
Sourcing focuses on identifying potential suppliers, evaluating their capabilities, negotiating contracts, and ensuring the best possible terms and conditions for the goods or services required. It’s about building relationships, vetting options, and selecting the most suitable suppliers to meet the organization’s needs.
Procurement vs Sourcing: 4 Key Differences
To explain further, here are four key differences between procurement and sourcing:
1. Scope
- Procurement: The scope of procurement extends beyond sourcing to include the entire end-to-end process of acquiring goods and services. Procurement encompasses all the activities before, during, and after purchasing.
- Sourcing: Sourcing specifically deals with the selection and management of suppliers.
2. Focus
- Procurement: Procurement focuses on the overall acquisition process and its alignment with organizational goals. The primary objective of procurement is to ensure that the organization obtains the right goods and services at the right cost, from the right suppliers, and at the right time.
- Sourcing: Sourcing focuses specifically on identifying and managing suppliers to meet specific requirements. Sourcing aims to create and maintain strong relationships with suppliers.
3. Activities
- Procurement: Procurement includes activities such as strategic planning, contract negotiation, order placement, and contract management.
- Sourcing: Sourcing is a specific activity within procurement, focused on supplier identification, evaluation, and selection. Sourcing supports procurement by establishing supply chains for procurement teams to utilize
4. Timeframe
- Procurement: Procurement is a long-term and ongoing process that involves strategic planning for the organization’s overall needs. It considers the entire lifecycle of the required goods or services.
- Sourcing: Sourcing is more focused on the initial stages of the procurement process. In some organizations, sourcing is an ongoing process; in most, sourcing is typically a more short-term, project-oriented activity focused on finding and selecting suppliers for specific goods or services.
Comparison Chart
For a summary of the differences between procurement and sourcing, refer to the following comparison chart:
| Procurement | Sourcing |
| An end-to-end process encompassing all the activities before, during, and after purchasing | Part of the procurement process; takes place before a purchase is made or when an issue arises during the procurement process |
| Focuses on what supplies are needed | Focuses on who makes supplies possible |
| Procures goods and services for the organization | Finds, vets, and contracts suppliers |
| Leverages supply chains to ensure supply as needed | Builds and manages supply chains |
| Utilizes vendor relations to acquire goods | Focuses on developing vendor relationships |
| Primarily concerned with leveraging established supply chains | Builds alternatives for resilience |
Synergy Between the Two
Procurement and sourcing are interdependent, with each playing a crucial role in optimizing the supply chain. Sourcing informs procurement decisions by identifying the best suppliers, while procurement implements sourcing strategies to execute successful acquisitions. A robust sourcing strategy feeds into an efficient procurement process, ensuring that the goods and services acquired align with the organization’s objectives while optimizing cost, quality, and supplier relationships.
Engaged in Complex Procurement?
Let’s face it, not all procurement is created equal. There’s a world of difference between ordering office supplies and purchasing materials and services with sophisticated technical requirements or managing the procurement for complex industrial projects or expediting materials from vendors across the globe.
Complex procurement demands more than standard solutions.
Current SCM is a cloud-based software-as-a-service (SaaS) that was purpose-built for complex procurement. We were born from the real-world experience of a leading industrial engineering firm who couldn’t find a procurement system that met their complex needs. So, they built their own.
Current SCM was explicitly designed to reduce errors between Engineers & Buyers by ensuring procurement professionals have access to the resources they need, including centralized procurement catalog(s), centralized procurement documentation, and centralized vendor management.
Current SCM encompasses activities that occur outside of the typical procure-to-pay process, and offers robust toolsets to support project procurement, third party procurement, technical procurement, and strategic procurement.
Current SCM provides a unified platform for procurement and materials management, offering comprehensive support for the planning, purchasing, and management of materials & services. With material and document tracking integrated into the Order and an Expediting dashboard within each Order, Current SCM provides a unique platform for Buyers and Expeditors.
And Current SCM was designed to drive collaboration among all procurement stakeholders.
Experience the difference. Contact Current SCM today to streamline your complex procurement processes.
