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.
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.
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.
To explain further, here are four key differences between procurement and sourcing:
For a summary of the differences between procurement and sourcing, refer to the following comparison chart:
|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
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.
Current SCM is the first of its kind - supply chain management software purpose-built to support the most complex procurement & materials management projects. With Materials Management and Vendor Document Requirements uniquely integrated into the Order, Current SCM provides a unified, collaborative platform to streamline the end-to-end process of project-driven procurement & materials management.
If you engage in any of Direct Procurement, Technical Procurement, Project Procurement or Third Party Procurement, Current SCM will improve your procurement & materials management workflow. If you engage in all four, Current SCM will revolutionize the way you do business.
Contact the team at Current SCM today to learn more!