Procurement vs Sourcing
Although procurement and sourcing have many parallels, we must investigate what distinguishes each if we are to grasp either one. Source vs procurement differs mostly in these ways.
From locating suppliers, verifying and contracting them, to keeping a good chain of vendors to meet organizational needs, sourcing handles everything. Procurement in the context of businesses is the acquisition of goods and services required.
Furthermore, depending on supplier performance over time, the sourcing team manages supplier connections and decides whether to keep or cut vendor partnerships using data created by the procurement team. Sourcing uses instruments like:
- Request for quotes for new products
- Gathering vendor information
- Uploading vendor information into vendor management system
- Defining lead time
- Negotiations and agreements on pricing
- Supplier risk analysis
- Minimum order quantities
- Standard packing quantity
- Quality metrics, etc.
From the basis the sourcing team has developed, procurement then picks off orders from within the company, orders items, tracks delivery, measures, confirms, notes quality and quantity metrics, etc.
In what ways may thorough procurement systems support procurement and sourcing activities?
For instance, although the sourcing department is in charge of negotiating contracts with vendors including pricing and minimum order quantities, the procurement department would ultimately use that data to know how much to budget if a specific number of supplies is needed. Given their lack of real-time access to this data, how then is the procurement department ever going to do its duties ?
Conversely, without any record of supplier performance or any supplier risk measures, how would the sourcing department choose which suppliers and contracts to renew? Without agreement between procurement and sourcing, your company cannot effectively carry out its business. Basically, procurement cannot exist without sourcing; without data from the sourcing department, procurement will be disabled.
Comprehensive procurement systems simplify the sourcing and procurement procedures, therefore relieving their associated suffering. Combining the procurement and sourcing systems into one that provides offers by a complete procurement tool:
- Digital systems and processes that minimise human error
- An easy approach to hand off suppliers to procurement, then back to sourcing for reviews, etc.
- A single source of truth for sourcing and procurement to work with
What qualities ought a complete procurement system to have?
Effective functioning of a complete procurement system depends on its ability to satisfy both procurement and sourcing requirements. Among these important qualities are:
- Purchase contracts
- Purchase requisition
- Purchase ordering
- Cloud storage for receipts and documentation
- Requests for quotes
- Budgeting tools
- Vendor performance ratings
- A full vendor management system
Using a procurement tool this thorough and grounded will:
- Help your procurement and sourcing teams operate on one page
- Shorten cycle times since choices are taken faster
- Provide better data visibility
- Highlight chances for cost reductions
