What Is The Difference Between Procurement And Sourcing?

Procurement and sourcing are similar in that they’re both processes for identifying and obtaining the right raw materials, services, and finished goods at an affordable cost. However, these terms have clear distinctions but are important ways to drive value within your supply chain management (SCM) system.

What is Sourcing?

Sourcing is the process of identifying, evaluating, and selecting a supplier based on the qualitative and quantitative factors of the supplier, their products, and services. Sourcing involves discovering more about suppliers through research, analysis, and potential site visits.

In sourcing from China, you’ll consider the supplier’s location, the quality of their products or services, the number of products or services, their delivery schedules, the supplier’s ability to meet your needs and expectations, and the supplier’s cost.

What is Procurement?

Procurement is the process of planning and managing the purchase of goods, services, and construction. In procurement, you’ll focus on the price and terms of purchase. These include selecting a supplier, negotiating the price, approving the terms and conditions, and managing the order.

The difference between sourcing and procurement is that procurement focuses on the purchase itself. It’s the last step before purchase. You decide on the item, services, or construction, and then you source the best supplier to provide that item.

Procurement also involves compliance issues, including researching the right suppliers and ensuring you get the right products and services that meet certain compliance standards.

Other Notable Differences Include:

  • Procurement is the entire process of planning, purchasing, and managing the delivery of goods and services. Sourcing is just one part of that process.
  • Procurement is the selection, assessment, and procurement of vendors. Sourcing is the identification and evaluation of potential vendors.
  • Procurement has a contractual relationship with vendors. Sourcing does not.
  • Procurement follows a specific process, and the terms “procurement” and “purchasing” are often used interchangeably. Sourcing does not follow a specific process.
  • Procurement is a strategic initiative or process to obtain materials and services needed to run an organization. Sourcing is the identification of potential vendors, typically by category.

How Can I Improve Sourcing and Procurement Process?

  • Get clarity on your sourcing and procurement processes

Make sure you have a process in place for both sourcing and procurement.

  • Set targets and expectations

Ensure that everyone involved in sourcing from China and procurement has clear targets and expectations and that those goals are aligned with your business strategy.

  • Use the right tools

Ensure that the tools you use for procurement and sourcing are appropriate for your organization.

  • Create a supplier relationship strategy

Focus on creating mutually beneficial relationships with your suppliers. When you do this, you’ll improve your sourcing and procurement process as well as your company’s reputation.

  • Create a procurement and sourcing culture

The sourcing and procurement process should be embedded in your organization’s culture. It should be an expected part of the business and a way of life for everyone in the company.

Procurement and sourcing are both important to the success of your supply chain management system. To improve these processes, identify the differences between procurement and sourcing and implement these ways to improve sourcing and procurement. By doing so, you’ll be able to source better products and services and manage purchases more effectively.

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