What is the Difference between Procurement and Supply Chain Management?
In our previous article, we discussed the significance of supply chain management in modern-day businesses. Procurement. Purchasing. Product acquisition. Pretty sure you’ve often heard these buzzwords and they sound quite similar. After all, procuring, purchasing, and acquiring seem like the same task, right? Not really. In reality, they all are distinct concepts in the procurement field that one is required to get a good grip on.
In this article, we’ll dive into the following;
- What is procurement and how does it work?
- What is supply chain management and how does it work?
- The key differences between procurement and supply chain management.
Understanding how both procurement and supply chain management function will aid in building resilience and sustainability in your organization so it can always exceed your customers’ expectations.
What is Procurement?
Procurement is the combination of total effort used to discover and acquire the supplies required for an organization to function effectively. This entails sourcing for supplies, contract sealing, managing suppliers, and settling invoices. Procurement is more than just purchasing supplies needed in the day-to-day running of your organization’s operations. Rather, procurement looks into the entire process, from when a need for a supply arises in an organization to the infrastructure required to deliver and continue delivering it is afforded.
With that in mind, to acquire supplies from suppliers to your organization’s doorstep, the procurement process comprises of several branches such as;
- Sourcingfor suppliers.
- Estimating demand.
- Determining the standards of quality and technical specifications.
- Negotiating costs.
- Management of contract.
- Acquiring the supplies.
What is a Supply Chain?
A supply chain is a network/chain of manufacturers, vendors/suppliers, logistics providers, and others whose collective efforts get the product into the client’s hands. It is made up of raw material providers, transportation firms, wholesale warehouses, and jobs and services that help in moving the product. Quality assurance, procurement, marketing, and sourcing are key responsibilities in a supply chain. It’s important to note that procurement is only one aspect of the supply chain management process.
What is Supply Chain Management?
Supply chain management is the art of managing the entire supply chain process, i.e. all the factors to consider so as to get products to their end-users as efficiently as possible. Supply chain management optimizes your supply chain so it operates as smoothly as possible by eliminating friction and ensuring a seamless functioning of the overall process of producing supplies, all the way to delivering them to the consumers.
Differences between Procurement and Supply Chain Management
Here are some of the key differences between the two;
- Procurement is the entire process involved in acquiring the supplies needed to effectively run your business operations.
- On the other hand, supply chain management involves the transformation of those supplies into finished products and delivering them to the end-users.
- Procurement has its focus on input, while supply chain management lays emphasis on output and delivery.
- While procurement lays emphasis on input, supply chain management deals with what is required to get your supplies into your consumers’ hands as efficiently as can be.
- Procurement deals with how the supplies are acquired, while supply chain management constitutes all that and more.
- Procurement can be seen as a small-scale version of supply chain management. While procurement only puts emphasis on building and managing supplier relationships to ensure they can deliver the supplies needed by your organization, supply chain management encompasses all that into its big bracket. As it is, procurement exists as a macrocosm of supply chain management seeing as it assists in acquiring the inputs that are then processed into end products.
- Procurement only supports the production bit of supplies, while supply chain management constitutes both production and distribution.
- Procurement exists as a very significant support function within the business management equation as it’s essentially only concerned with ensuring the constant flow of the supplies an organization needs to process into finished products.
- On the other hand, supply chain management is the main function that procurement supports.
In essence, supply chain management focuses on the way supplies are transformed into end products and delivered to the consumers. Supply chain management encompasses the entire process, while procurement exists to give it the input it needs to work. To get more in-depth knowledge on the processes involved in procurement and supply chain management and advance your procurement career, enroll for a Procurement & Supply Chain Management course today and get a 10% discount!