Difference Between Sourcing And Procurement Process

1245 Words3 Pages

Sourcing and Procurement are processes in supply chain management (SCM). It is not uncommon to see the two terms used in the same context although there are differences.
Sourcing
Sourcing is a strategic process that is more comprehensive and takes in a wider organisational view than procurement alone does. Sourcing sets out to ensure that procurement processes and purchasing activities are in line with the objectives and goals of the supply chain as a whole. With this focus in mind, sourcing follows five salient principals
• Accesses the total value - The total cost of ownership (TCO) model moves away from arm’s length relationships that are based on lowest purchase cost and instead takes a holistic view to calculate the total cost to the …show more content…

Working collaboratively and cross-functional members of the supply chain Sourcing sets out to achieve alignment with the goals of the SC
Key sourcing processes
The first step in SCM sourcing is the creation of a strategic plan that agrees on the scope and design of the process. This needs to understand the nature of the materials and services required for the specific project, the purpose they serve and the financial implications to the organisation.
In order to fully identify the scope and magnitude of the project, a formal spend analysis is required. The objective being to understand cost breakdowns, current purchasing approaches and identify areas that could be improved. Depending on the nature of the business an evaluation of wither to purchase raw materials and manufacture a solution or to outsource some or all of the needs to allow the SC to focus on its core competencies is …show more content…

Vendor Selection and Management
When selecting vendors, the most important factors to consider are the quality, reliability, capability, financial stability, quality of materials of services provided and the risk involved working with a particular vendor.
Quality relates to ensuring that the item or service supplied firstly meets the specification but also that considers the lifespan of the product, ease of repair and maintenance (Coyle, 2017). For example, a light fitting may meet the required light output specification but if it only lasts a few hours before blowing it would not be suitable in a long-life appliance.
The reliable supply of materials and services is a critical factor in a successful SC, therefore an essential function of the Procurement Manager is ensuring that flow is matched to that of demand. In the event of supplier delays procurement is responsible for following up with suppliers, negotiating and ensuring that actions are taken to reduce delays to a minimum. Globalisation has added to SC’s concerns of delays which can pose significant

More about Difference Between Sourcing And Procurement Process

Open Document