Procurement vs Sourcing – 5 Crucial Differences You Should Know

It’s amazing how words that are constantly being used for a single particular thought can end up confusing so many people. 

The words hold true for two peculiar terms. The first term is procurement and the second term is sourcing. Both words are always used to represent one important thought though; to get things for the company.

So for today, we are going to talk about the difference between procurement and sourcing. We’ll each talk about each term, give examples, and at the end of the day, clear up the confusion that has hounded countless procurement managers and numerous companies.

What is Procurement?

Procurement is the full process of sourcing and gathering all the materials needed for your products and services. It is the moment when you are placing purchase orders for numerous printers, computers, and all other machines needed by the company. 

To put it simply, procurement is when you buy things that are needed for your company. 

For the procurement manager, the process of procurement involves from planning purchases, negotiating market prices, placing the order with each supplier, getting the order confirmation for each purchase, up until following up with the suppliers until all materials are delivered to the office come delivery day. 

If a company doesn’t have a decent procurement process, operations within the company will most likely halt. Imagine if your company’s procurement manager failed to buy the computers that are needed for you and your co-workers to work in. It would be disastrous for the company and for you if the company closes.

This is why companies invest billions of dollars in procurement systems to make sure that the company’s procurement process is up to date and working perfectly for the company.   

What is Sourcing?

Sourcing, to put it simply, is to find the supplier where the materials you need to procure are being offered or sold.

Because if you can’t find a good supplier for the materials that you need to procure or buy, then to whom are you going to buy it from?

The process of sourcing is an actual stage that is set way before the procurement process. Again, if you can’t find a good retailer for the computers that you need to procure, then you are going to have a big problem. 

A good sourcing process will give you a list of reliable, affordable, and quality suppliers who can give you the items that you need for procurement.

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What is the difference between procurement and sourcing?

For this question, we are going to simply divide each fact into five important points.

To make things simpler, here’s a chart that we at Procurement Tactics designed:

Procurement

Sourcing

Made of different systems that work towards buying products/materials It is a part of the procurement process itself
The act of buying materials/supplies for your company Finding a supplier that sells materials/supplies at a good price
Guarantees that the flow of inputs and supplies goes smoothly Sourcing makes the procurement process easier
Takes focus on the what of supplies Takes focus on who is making the supplies.
  Makes sure that the supply chain producing the inputs/supplies are guaranteed

This way it’s not going to be too difficult to review it again should you need to.

Procurement is to buy items for your company or store while sourcing is to find where those items are being sold at high quality and at an affordable rate.

Plain and simple right? Let’s move forward.

Procurement can actually happen without sourcing.

Sometimes, a company with a higher budget may simply inform the procurement manager to just buy 30 computers from the local computer shop because, simply put, it is probably the only computer shop that is near their office. The procurement manager can then create the whole procurement process of negotiating for the price and finally, buying the said computers.

Sourcing makes the whole procurement process easier.

For the procurement manager, having a team of reliable sourcing specialists is a godsend. The sourcing specialists will give the procurement manager a list of the best venues where to get the materials the office or company is going to need. From that list alone, the procurement manager can plan the whole procurement process with ease.

Procurement focuses on the what of supplies while sourcing takes aim at the who is making the supplies.

For the procurement manager, the quality and price of the supplies needed for the office are a very important aspects of the procurement process. With those, he/she can determine if the supplies are good for purchasing. Meanwhile, sourcing takes aim at who is supplying the materials or supplies. This is to make sure that the source is reliable and affordable.

Procurement is about making sure that the flow of inputs and supplies goes smoothly while sourcing makes sure that the supply chain producing the inputs and supplies is guaranteed.

Both procurement and sourcing work hand in hand to make sure that the materials needed for the company to keep working are provided without problems. Think of procurement as the cogs inside the machine that make it work and sourcing is the oil that keeps the cogs in tip-top shape.

Why is it important to learn the difference between procurement and sourcing?

  • Procurement managers often think that procurement is the same as sourcing. Thus, they fail to incorporate the importance of sourcing in a procurement process simply because both terms mean the same thing.
  • Recognizing sourcing will save you (and your company) time and money. You can create a sourcing process to look for potential suppliers before you start the procurement process.
  • In cases where automated procurement systems are required, a procurement manager who is unable to tell the difference between procurement and sourcing will not be able to make full of use of the automated program.
  • Learning the difference between procurement and sourcing is basic knowledge among procurement managers.
  • Recognizing the potential of both sourcing and procurement will give you, the procurement manager, the edge in negotiating with suppliers and vendors. You can take your pick from the best suppliers and you can negotiate for better prices per supply.

FAQ

  • What is the difference between procurement and sourcing?
  • The difference between procurement and sourcing is that the former is all about buying materials while the latter is about looking where to buy the materials.

  • What is procurement?
  • Procurement is the process of buying materials/products for the company. It can be used for the company’s daily operations or for the company’s growth.

  • What is sourcing?
  • Sourcing is the procurement process of looking for good sources of products/materials at cheaper costs.

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