Supply and procure are two terms often used interchangeably, and therefore supply chain management and procurement management are more often than not assumed to be the same things. However, that is far from the truth.
While supply chain management is the tree, procurement is one integral branch of it. That is also the reason why businesses have two distinct departments and designations for both. For any business to run effectively and for a prolonged period, both supply and procurement are needed. Listed below are their fundamental differences and what constitutes each:
What is Supply Chain Management?
Supply chain management is a macroscopic umbrella that houses a range of end-to-end supply-related activities. The fundamental task of a supply chain manager is to ensure timely and qualitative delivery of the final product/service to the customer.
However, to do that successfully, the seamless flow of every element in the supply chain funnel needs to be ensured. Therefore, while the end result is delivering demand in the consumer’s hands, everything that constitutes leading to that is also considered a part of the supply chain.
Supply chain managers look after quality checks, sourcing, marketing, procurement, and logistics. Procurement is an integral part of the supply chain, whereas supply management is about managing the entire supply journey from start to finish.
What is Procurement Management?
Unlike supply chain, procurement concerns itself with the process of acquiring or procuring materials for the sake of manufacturing. It includes responsibilities like vendor sourcing and selection, analyzing demand, upkeeping quality, price negotiation, contract management, managing the network of vendors, and sourcing suitable goods or services depending on the nature of the business.
A procurement manager aids the starting point of the supply chain to ensure uninterrupted production and helps maintain the continuity of the chain. Procurement management aims to bridge the gap between demand and supply and therefore concerns itself to provide end-to-end demand solutions.
Procurement is also further divided into three kinds- direct, indirect, and service. Direct is the most common type and means sourcing raw materials that directly impact the company’s finished products. Hence this type of procurement is crucial for manufacturing companies.
On the other hand, indirect is the procurement of goods needed for the business’s internal use alone. And service procurement is the sourcing of tools that help to manage the business’s workforce. For example, sourcing HR software or attendance tools for the company.
Significant Differences Between the Two:
The supply chain is related to output and procurement to input. A supply chain is the art of managing factors that determine the final product. Procurement is the art of managing elements that would help make the product.
Supply chain aids production and distribution, procurement aids only production: The nature of procurement is such that it aids only up till the point of production, whereas the supply chain manages the whole production and distribution process.
Supply chain managers build professional relationships with people across the spectrum, unlike procurement managers: Since procurement is one subset of supply, managers dealing with procurement maintain ties with suppliers for established ease of business. In contrast, supply chain managers have a lot many people to manage and develop good relations with.
Armed with the knowledge mentioned above, you are now equipped to make better decisions for your business and know what to look for in your talent.