What is the Difference Between Sourcing and Procurement?
🆚 Go to Comparative Table 🆚The main difference between sourcing and procurement lies in their focus and the specific activities they involve. Here are the key distinctions between the two:
- Sourcing focuses on identifying, evaluating, and selecting suppliers or vendors to obtain goods, services, or raw materials required for an organization's operations. It involves activities such as finding suppliers, vetting and contracting them, and maintaining a healthy chain of vendors to cater to the organizational needs. Sourcing is a specific segment under a procurement cycle and is concerned with building and managing supply chains.
- Procurement is a larger process that encompasses the entire end-to-end process of acquiring goods, services, or works from external sources. It includes identifying needs, sourcing, negotiating, purchasing, receipt and inspection of goods, invoicing, payment, and supplier management. Procurement is part of supply chain management and aims to maximize value through the entire procure-to-pay process, maintain relationships with the best suppliers, and minimize risk throughout the supply chain.
In summary, sourcing is focused on finding and vetting suppliers, while procurement involves the entire process of acquiring goods and services from those suppliers, including purchasing and managing the relationships with suppliers. Both sourcing and procurement are essential components of an organization's supply chain management and should be employed in tandem to ensure success in the procurement process.
Comparative Table: Sourcing vs Procurement
Sourcing and procurement are two closely related but distinct processes within an organization. Here is a table highlighting the key differences between the two:
| Feature | Sourcing | Procurement |
|---|---|---|
| Focus | Finding, evaluating, and engaging suppliers of goods and services | Buying goods and services, including transactional and strategic aspects |
| Strategic vs. Tactical | Strategic | Tactical |
| Relational vs. Transactional | Relational | Transactional |
| Steps | Market analysis, vendor analysis, vendor database, vendor selection, contract development, contract negotiation, strategy design | Requisition analysis, purchase order development, order placement, delivery tracking, payment, spend data and analytics, feedback to sourcing |
| Supplier Management Against Cost and Supply Chain Needs | Included | Excluded |
| Maximizing Value | No purchase implied or required | Maximizing return on investment |
| Stakeholders Involved | Primarily procurement team | Both procurement and end-users team |
Sourcing is a strategic process that involves finding and evaluating potential suppliers, negotiating with them, and selecting the best options for the organization. Procurement, on the other hand, is a more tactical process that involves buying goods and services, which includes both sourcing and purchasing activities. It also involves data analysis, vendor and contract management. Both processes are essential for an organization to streamline its operations and maintain strong supplier relationships.
- Procurement vs Purchasing
- Purchase vs Procurement
- Acquisition vs Procurement
- Acquire vs Procure
- Public vs Private Procurement
- Insourcing vs Outsourcing
- Vendor vs Supplier
- Contract vs Purchase Order
- Supplier vs Distributor
- Proactive vs Reactive Purchasing
- Sources vs Resources
- Invoice vs Purchase Order
- Outsourcing vs Contracting
- Logistics vs Supply Chain Management
- Purchase vs Buy
- Supply Chain Management vs Operations Management
- Supply vs Demand
- Supply Chain vs Value Chain
- Point of Sale vs Point of Purchase