Many people talk about procurement and supply chain management as if they are identical processes, but there are important differences between the two. Supply chain management is the handling of the entire production flow of goods or services — from ordering the raw components to the final product delivery; whereas procurement is just one aspect of supply chain management.
In this article, we’ll consider the details of both procurement and supply chain management, what each process consists of, and how to distinguish between the two.
What is procurement?
Procurement is the process by which organizations source goods and services to achieve their objectives and meet their business needs. It’s one step in the supply chain management process. Procurement involves everything it takes for a company to acquire the goods and services it needs, including planning, quality control, pricing, supplier selection, and waste management.
There are two types of procurement:
The procurement process is the series of steps or activities that an organization performs as part of its procure-to-pay cycle—from identifying the procurement needs, running RFPs or RFQs, all the way to the point of invoicing and payment.
Elements of the procurement process
There are several steps in the procurement process:
The procurement process involves a lot of tracking and updating, which is why many companies have a procurement manager.
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What does a procurement manager do?
Procurement managers are responsible for eliminating waste in the procurement process, controlling costs, and optimizing the buying process. They manage vendors and suppliers, negotiate payment, and ensure the process is as organized as possible.
Here are some examples of a procurement manager’s responsibilities:
Now, how does procurement fit into overall supply chain management? Let’s take a look at what the supply chain is and how it’s different from procurement.
What is a supply chain?
A supply chain is the complete network of a company, including its suppliers and vendors, and the lifecycle of processes; from the raw materials, to product development, to delivering the final product to the customer.
An organization's supply chain may include:
What is supply chain management (SCM)?
The output of a step is simply what results from carrying out the transformation.
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What does a supply chain manager do?
A supply chain manager oversees and manages every stage of the supply chain, from production to distribution to payment. The manager is also in charge of optimizing and streamlining all processes for better business efficiency.
A supply chain manager is responsible for the operation and optimization of a company's supply chain, including:
While a supply chain manager can oversee the procurement step in the supply chain process, there is a difference between procurement and supply chain management.
What's the difference between procurement and supply chain management?
Procurement and supply chain management are related, but there are some subtle differences between the two processes. Procurement is how a company sources goods and services from external suppliers, while supply chain management is the management of all the processes and steps that must be taken to transform raw materials into final products and deliver them to customers.
Procurement is a subset of processes within supply chain management that focus on the identification and acquisition of goods. Supply chain management is a broader set of processes that also includes vendor selection, logistics, invoicing, and distribution.
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Procurement involves everything it takes for a company to acquire the goods and services it needs, including planning, quality control, pricing, supplier selection, and waste management.