If you are a part of any type of company, you probably already understand the importance of the sourcing and procurement process. Purchasing the needed goods and services is crucial for the operations of any company and is, in most cases, accountable for the biggest part of a company’s total costs. Although many people have heard of sourcing and procurement and use them as interchangeable synonyms, these terms stand for two different concepts. Understanding these concepts is essential for the well-being of any company so, in this article, we are going to talk about the differences between these two concepts and the importance of each of them.
At a certain level, sourcing and procurement are similar in meaning, both being synonyms of the word purchasing. However, these two terms encompass something more than a simple purchasing process, because they refer to the process of obtaining the high quality goods and services the client needs, at the right time and at a good price.
Procurement is a broader term than sourcing and, in some ways, sourcing is included in the larger process of procurement. On one hand, procurement consists of specification development, market research, price and payment date negotiations, marketing activities, purchasing activities, contract administration, inventory control, receiving and store controlling. On the other hand, sourcing is the act of identifying the needs of a company or organization and finding the ideal sources that can offer certain products and/or services.
Until now, procurement and sourcing were though about as necessary processes, but they were rarely celebrated as crucial act that can make or break the performance of any company. However, the situation has greatly changes in the last years. Procurement and sourcing departments in companies or external procurement organizations that collaborate with these companies are now playing crucial roles for their success and many people think they won’t stop there. Procurement now has a strategic role in big companies and has become a more complex process, with many different facets, especially for multinational companies. Old fashioned procurement managers have never imagined such a fast growth of all the elements that compose the procurement process and have begun to acknowledge the fact that they need help with the challenges they are facing every day.
As a company trying to succeed in and ever changing business world, you have two choices: you can either invest in a larger procurement department or you can outsource it. Procurement outsourcing is a rather new concept, as opposed to outsourcing departments such as IT, Human Resources or Legal.
If you have decided to find a procurement and sourcing company to collaborate with, you can find one by simply doing a short internet search. It may be wise to search sourcing and procurement and you will get all the information you need in order to hire such a company. By doing this, you can cut back on the expenses of an entire department, while working with people that have a lot of experience in this area, a network of companies they collaborate with and a brand new perspective on the way your company sources the goods and services it needs.