Many B2B people think of a procurement supply chain as a straight line. They picture link after link connecting manufacturer and consumer. Thinking that way might help you keep things in order. But, advancing technology has made that approach of sourcing and purchasing “old school.”
Any supply chain is much more dynamic. It exists on several levels at the same time. And, if it’s your job to control spending and organize your company’s procurement process, you need to know what the difference between sourcing and purchasing can mean to you.
Define Sourcing and Purchasing
“Sourcing” evaluates suppliers. It negotiates supply contracts, and it manages supplier performance. The job is accountable by the stakeholders for spending management.
An increasingly competitive economy has made sourcing a central business function. The advance of business technology in general — and in sourcing software specifically — has made sourcing a strategic crucial tool in identifying top-flight partners, negotiating best prices, and prodding suppliers to perform. Sourcing has become the means to beat the competition at supply cost, quality, and speed.
At the sourcing stage
The business must have the best quality in resources at the lowest fair price. That price determines today’s prices and the business’s ability to compete in future markets.
Any given business needs resources on multiple layers. That might include raw materials, advanced machinery, energy sources, and more. And, once the quality vendors are identified, the sourcing negotiations take some experience and sophistication.
Sourcing may negotiate for short- or long-term deals. And, the sourcing pro may negotiate packaging, delivery, graduated pricing, and more.
Procurement’s sourcing tasks include abilities to:
- Research, assess, and select vendors.
- Determine payment terms in the business’s best interest.
- Understand relevant contract law.
- Negotiate difficult and complex contracts.
- Source resources that comply with regulatory authorities.
- Use state-of-the-art sourcing software.
At the purchasing stage
“Purchasing” refers to the process of acquiring goods and services for the business. The emphasis is on the administrative process of billing, invoicing, inventorying, and the like.
When goods are bought or sold, it creates a trail of exchanges, and they must be verified and justified. The purchasing function tracks and reconcile the transactions.
Purchasing focuses on financial controls on the procurement of indirect supplies like the office supplies that do not directly impact business outcomes. So, it becomes more of an accounting process than strategy.
Purchasing people need patience and experience to do their job according to best accounting practices. That requires abilities to:
- Verify and compare detail lists.
- Prepare and confirm purchase orders.
- Compare orders against inventory.
- Confirm items received against orders.
- Forward available inventory items by verifying stock; scheduling delivery.
- Complete, process, and distributes required reports.
The difference between sourcing and purchasing checklist
Here’s a quick check on the difference between sourcing and purchasing:
|Cost Per Unit||Best Value||Lowest Cost|
|Procedure||Research||Standard Operating Procedure|
|Quality||Highest Quality||Volume Discounts|
|Relationship||Direct and Sustainable||Local|
|Skills||Heavy Negotiating, Relationship Building, and Collaboration||Negotiating and Accounting|
|Supplier||Does the Right Things||Does Things Right|
Technology reduces purchasing duties because scanning barcodes and digital inventories integrate data in real time and facilitate reporting. Sourcing, on the other hand, values that data but still relies on strategic relationship building and experienced negotiation.
What good sourcing and purchasing software can mean to you
The best tech support comes from a spend management system that simplifies the procurement system while improving the visibility of your strategic decisions.
You want one to automate multiple procurement workflows, including requests, approvals, purchases orders, and more to reduce the workload on employees, purchasing managers as well as procurement and financial departments.
It will expedite the entire expense management flow with robust tools that monitor and integrate data on requisitions, order management, contract management, and budget control.
What you ultimately want is a single platform, easily-navigated procurement management system that doubles as a spend management platform to bridge the difference between sourcing and purchasing.