Have you ever wondered what the difference between procurement and supply chain management is? Even though above-mentioned concepts are related, there is a distinct difference between them. In our today’s article, we will figure out how these terms differ and explain why it is absolutely wrong to use them interchangeably.
What is procurement
In a narrow sense, procurement is the process of acquiring goods and services the company needs to carry out its basic requirements. Procurement covers the following list of tasks:
- Purchase planning;
- Determining standards of quality;
- Identifying suitable suppliers;
- Price negotiating;
- Financing purchases;
- Acquiring required goods and services;
- Inventory control and disposal of waste production
Procurement’s main stages are preparation and processing of a demand, end receipt, and payment approval. In the overall supply chain process, procurement stops once the company possesses the required materials or services. The main objective of the procurement is to ensure the buyer receives goods or services at the best possible price when aspects such as quality, quantity, time, and location are compared.
Supply Chain Definition
To give the clear definition of supply chain management, we firstly need to determine what supply chain is.
So, supply chain is the network of manufacturers, suppliers, logistics providers and other people involved in getting your product in the hands of a customer. Supply chain incorporates not only raw material gatherers, transportation companies and wholesale warehouses, but also tasks and functions that contribute to moving the following product. These tasks represent quality control, marketing, procurement and sourcing.
Using the analogy, the supply chain can be considered the entire computer, while procurement and sourcing are its key components. As we figured out what supply chain is, now it will be easier to define the supply chain management.
What is Supply Chain Management
Supply chain management (SCM) is the act of supply chain professional managing in order to ensure it is operating as forcefully as possible. This implies that all suppliers and manufacturers are maintaining the desired quality of production. The SCM’s ultimate goal is to reduce inventory with the assumption that products are available when it is exactly needed. Therefore, when you are talking about supply chain management, you are referring to the range of activities from procurement to customer delivery.
Procurement is the process of getting the goods your company requires, while supply chain management is the extensive infrastructure needed to get you those goods. Supply chain management should ultimately be considered one of many responsibilities faced by a procurement function.
By highlighting these differences, you will get a better, more fulsome understanding of the complex procurement world. We sincerely hope that from now you will stop using terms interchangeably when you shouldn’t, especially when it comes to procurement and supply chain management.