Sourcing & Procurement

Sourcing and procurement are two critical functions within supply chain management, focused on acquiring the goods and services a company needs to operate. Although they’re often used interchangeably, they have distinct roles:

Sourcing:

• Definition: Sourcing is the process of finding, evaluating, and selecting suppliers or vendors to provide goods and services. It focuses on building strategic relationships with suppliers to ensure quality, cost-efficiency, and reliability.
• Key Activities:
  • Supplier identification and evaluation
  • Negotiation of contracts and terms
  • Risk management and supplier performance assessment
  • Developing long-term supplier relationships
    
    

Procurement:

• Definition: Procurement is the process of acquiring the goods and services identified during sourcing. It involves the operational steps to purchase and receive goods, ensuring they meet the necessary specifications and are delivered on time.
• Key Activities:
  • Purchase order creation and approval
  • Order processing and tracking
  • Receipt and inspection of goods
  • Payment processing and invoice reconciliation
    
    

Key Differences:

• Focus: Sourcing is strategic, emphasizing supplier relationships and cost optimization, while procurement is transactional, focusing on the purchasing process.
• Time Frame: Sourcing is long-term and involves strategic planning, whereas procurement is more short-term and operational.