When you hear the terms purchasing, product acquisition, and procurement being thrown around, it’s easy to get them confused. After all, they all sound like three different ways of describing the same process, right? Certainly, there are similarities, but in fact, they are completely different processes. The same applies with procurement and supply chain – are they one in the same? In this article, we’re going to take a look at the following:
- What is procurement?
- What is supply chain management?
- What are the key differences between procurement and supply chain management?
Having a thorough understanding of each aspect is crucial in building an efficient organisation that operates as smoothly and seamlessly as possible – whilst always exceeding customer expectation.
What is procurement?
First of all, what is procurement? Procurement refers to the process of discovering and securing the supplies that an organisation needs to operate effectively. This process includes everything from:
- Sourcing for supplies
- Writing contracts
- Managing suppliers
- Settling invoices
Procurement goes beyond the mere purchasing of supplies. Instead, procurement focuses more on the broader requirements that go into the entire process – from the moment you determine precisely what supplies you need to operate, through to implementing the required infrastructure to receive those supplies regularly and without room for error (maintaining solid supplier relationships).
Here are some other key aspects that you can expect from the procurement process:
- Searching for the relevant vendors
- Estimating your demand
- Determining the quality standards
- Negotiating prices and contracts
- Managing said contracts
- Acquiring the goods and services as necessary
What is a supply chain?
Now that we have a better understanding of what procurement it and how the process works, what is a supply chain?
The supply chain is your network of manufacturers, suppliers, logistics providers, and any other relevant parties who work together in order to ensure that your goods get from the point of origin to the client / the hands of your customer.
The supply chain is made up of a variety of parties that help move the products. The responsibilities of a supply chain manager include:
- Quality assurance
- Marketing procurement
The supply chain of any given organisation varies depending on the type of items or services that it sells. It is also important to note that procurement is only one small cog in the supply chain management process.
Supply chain management involves optimising your supply chain as best as possible, eliminating any possible friction, reducing costs, and ensuring that the entire process runs as smoothly as possible from start to finish.
What is the difference between procurement and supply chain management?
Again, procurement is the process of acquiring the supplies a business needs to operate. Supply chain management on the other hand encompasses this process, including how said supplies are products and transported from the point of origin to the end user. Here are the key differences:
- Procurement focuses on input – whereas supply chain management incorporates output and delivery
- Procurement deals in acquiring supplies – supply chain management encompasses that process and more
- Procurement is vital in ensuring a steady flow of supplies – supply chain management deals in “how” the supplies are moved about
Again, the easiest way to look at it, is that procurement is a cog in the supply chain management machine.
Procurement has a strong emphasis on building supplier relationships and managing them well. But the supply chain management process deals with all aspects involved with getting the goods from your suppliers, through to your door step – and indeed the end user.
Are there any similarities between procurement and supply chain management?
Despite the many differences between procurement and supply chain management, there are some similarities:
- Both supply chain management and procurement are crucial in delivering your business goals
- Both processes are internal operations
- They also need to be managed proactively and efficiently in order to keep your business operations running smoothly. Once one fails, the other fails – they are crucial for both one another and your business.
A procurement officer and supply chain manager will work closely together in order to ensure that your company gets the goods and supplies that it needs to function. Here’s a quick recap:
- Procurement: Identifying the required supplies for business operations, negotiating supplier contracts, maintaining a steady flow.
- Supply chain management: Encompassing the procurement process and overseeing how said supplies get from the point of origin through to the end user.
And that about sums it up! If you find yourself feeling a little overwhelmed – or if you are looking to outsource your procurement and supply chain management requirements to a reputable third party, then please feel free to contact us today. With years of experience, a broad network of suppliers and logistics providers, you can leverage our existing infrastructure and essentially “plug-in”, saving you a great deal of time, money, and unnecessary stress!