What is the Difference Between Purchasing, Procurement, and Strategic Sourcing?


For those of us who aren’t familiar with the supply chain, you may not understand the difference between #purchasing, #procurement, and #strategicsourcing. These terms often get thrown around by professionals and may seem synonymous, however, there is an important difference between each term and how they may be used to operate a business.

Purchasing

Purchasing is the activity of physically buying products and materials on behalf of a company, whether it is the raw materials for the product or the finished wholesale goods. Purchasing also involves buying assets, consumables, and services that are required to run a business.

Hence, you can think of purchasing as the transactional element in the supply chain. A purchasing team, however, will not be responsible for identifying and bringing aboard new suppliers, but they will raise orders for products and services and pay for them.

Procurement

Procurement on the other hand involves a broader set of processes that includes not only the shopping and payment of goods and services, but also other activities associated with obtaining a product or service.

A procurement team will start by holistically identifying what a business requires to operate across all departments. They will then undergo a selection process for onboarding the right suppliers that meet the business’ needs. This process may be rigorous and involve tenders for larger requirements within the business. Once a new supplier has been chosen, contractual agreements are established. The procurement team is also responsible for managing lasting relationships with suppliers and creating and managing purchasing policies and processes for the wider business.

Moreover, the major difference between purchasing and procurement is such that purchasing follows a standard process, regardless of the size and nature of the company. Procurement follows processes that are structured around the unique requirements of a business and takes into consideration the size of the company and how this will affect its supplier network.

Strategic Sourcing

Lastly, strategic sourcing is an even broader process of identifying the expenditure profile of a company and aligning procurement decisions with an overall busines strategy to ensure that all purchases offer maximum contribution to the business.

Strategic sourcing realises that a company’s supplier network should recognised as a collaborative ‘customer-supplier’ loop rather than a one-way relationship, viewing suppliers as a critical partner in building a sustainable company. Importantly, strategic sourcing involves the proactive and continuous evaluation of purchasing activities to ensure the needs of the company are consistently and efficiently met.

Strategic sourcing is a very mature process in the supply chain and is typically only used for core purchases of high value within the business. The process involves detailed and thorough market research for the product or service, which is then used to leverage against the expenditure profile of the company and its supplier relationships.

If you are searching for a team that can accomplish any of these processes within the supply chain, Source Buy Sell may be what you’re looking for. We offer services from basic purchasing requirements, all the way through to strategic sourcing and holistic evaluation of your company’s expenditure. With over 30 years’ experience in the supply chain, Source Buy Sell has an extensive supplier network and understanding for the niche requirements each company may have and how this will affect their purchasing decisions. If you are interested in how we can help you reduce costs or make better purchasing decisions, please contact us today to discuss the changes you would like to make.

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