The Difference Between Procurement and Supply Chain Management (2024)

FAQs

The Difference Between Procurement and Supply Chain Management? ›

To recap, procurement is the process of acquiring the supplies you need to run your business operations. On the other hand, supply chain management encompasses how those supplies are transformed into finished products and delivered to the end-users.

It acts as a bridge that connects the demand for goods and services with the supply side. Starting from identifying potential suppliers, negotiating terms, and finalising contracts to managing relationships, procurement plays a pivotal role in maintaining a robust supply chain.

The relationship can be described as follows: Purchasing is a component of the supply chain: Purchasing is responsible for acquiring goods and services from suppliers, while the supply chain encompasses all the activities involved in producing and delivering goods and services to customers.

It ensures that materials, services and supplies are purchased at the best possible price while meeting the required specifications. The four main roles of procurement are sourcing, negotiation, contract management and supplier relationship management.

Job prospects for procurement and supply chain management professionals are generally quite promising. As businesses expand and globalize, the importance of efficient and effective supply chain and procurement processes becomes even more critical.

Procurement can be categorized in several ways. It can be classified as direct or indirect procurement, depending on how the company will use the items being procured. It can also be categorized as goods or services procurement depending on the items that are being procured.

Procurement is a branch of supply chain management. Procurement's objective is to acquire the inputs you need to run daily business operations. Supply chain management deals with the transformation of those inputs into finished goods and product delivery to customers.

Purchasing: The supply chain encompasses everything from purchasing the raw materials to creating the product to shipping the finished product to the customer. In order to ensure purchasing functions well, a manager must have visibility and anticipate the need for new supply.

The supply chain manager is a strategic role that acts as an umbrella covering both purchasing and procurement. But that's not all - it also covers the logistics and supplier quality. The supply chain manager's responsibilities are not limited to looking after inbound materials, but they also direct outbound flow.

Is purchasing and procurement the same thing? ›

Purchasers are often looking to get items for the best price rather than the best overall value. Procurement is a more long-term, holistic approach to acquiring goods and services for the business. It involves tasks such as sourcing vendors, negotiating and closing contracts, and record keeping.

Procurement falls under the auspices of the purchasing department within an organization. Purchasing is responsible for acquiring goods and services at a cost effective manner, maximizing corporate asset utilization, and creating value for shareholders.

Procurement Specialists often navigate complex negotiations, tight deadlines, and cost management, which can be inherently stressful. However, by establishing strong relationships with suppliers, maintaining clear communication with stakeholders, and staying informed on market trends, they can mitigate stress.

A 'supply chain' refers to the system and resources required to move a product or service from supplier to customer. The 'value chain' concept builds on this to also consider the manner in which value is added along the chain, both to the product / service and the actors involved.

Supply Chain – A set of systems that shows the flow of a good or service, information, and finances. Supply Chain Management- Supply chain management is the handling of the entire production flow of a good or service to maximize quality, delivery, customer experience and profitability.