Procurement vs. Supply Chain

the difference between Supply Chain Management (SCM) and Procurement. Think of it this way: Procurement is one important part of the larger Supply Chain.

Here's a more detailed comparison:

Procurement:

  • Focus: Primarily concerned with the acquisition of goods, services, or works needed by an organization. It's about buying things.
  • Scope: Narrower. It involves the processes directly related to purchasing inputs.
  • Key Activities:
    • Identifying needs for goods/services.  
    • Sourcing and selecting suppliers.
    • Negotiating contracts and pricing.  
    • Placing purchase orders.
    • Managing supplier relationships (often focused on specific transactions or contracts).  
    • Ensuring compliance with purchasing policies.  
    • Receiving goods/services (sometimes overlaps with logistics).  
  • Goal: To acquire the necessary inputs at the best possible price, quality, and terms, while mitigating purchasing-related risks. 1 Often focuses on cost savings and supplier performance for specific acquisitions. 

Supply Chain Management (SCM):

  • Focus: Oversees the entire end-to-end flow of goods, services, information, and finances, from the initial sourcing of raw materials all the way to the delivery of the final product/service to the end customer, and potentially handling returns.  
  • Scope: Much broader and more strategic. It encompasses all activities involved in planning, sourcing, making, delivering, and returning products/services.  
  • Key Activities:
    • Planning: Demand forecasting, supply planning, inventory planning.  
    • Sourcing: Strategic supplier selection and relationship management (which includes Procurement).  
    • Making: Manufacturing, production scheduling, quality control.  
    • Delivering: Logistics, warehousing, transportation, order fulfillment.  
    • Returning: Reverse logistics, handling returns and repairs.  
    • Enabling: Managing information flow, finances, performance metrics, and technology across the entire chain.  
  • Goal: To optimize the efficiency, effectiveness, and resilience of the entire supply chain network. This includes minimizing total costs (not just purchase price), improving customer satisfaction, reducing lead times, managing inventory effectively, fostering collaboration between partners, and adapting to market changes.

Here's a simple analogy:

Imagine building a house:

  • Procurement is like the specific task of going out to find, negotiate with, and buy the bricks, wood, windows, and other materials needed.
  • Supply Chain Management is the entire process: planning the house design, figuring out when you need each material, coordinating the delivery of materials (logistics), managing the construction schedule (making), ensuring materials arrive undamaged, potentially handling leftover materials (returns), and overseeing the whole project from foundation to handing over the keys.
Procurement is a vital function within the strategic framework of Supply Chain Management. SCM takes a holistic view, ensuring all the different parts, including procurement, work together seamlessly.

https://www.sap.com/products/scm/what-is-supply-chain-management.html#:~:text=SCM%20includes%20all%20activities%20that,Explore%20SCM%20solutions


Supply chain management definition

Supply chain management includes all activities that turn raw materials into finished goods and put them into customers’ hands. This can include sourcing, design, production, warehousing, shipping, and distribution. The goal of SCM is to improve efficiency, quality, productivity, and customer satisfaction.


https://una.com/resources/article/six-types-of-cost-savings-in-procurement/#:~:text=March%2010%2C%202025,mix%20of%20cost%20savings%20strategies.


https://en.wikipedia.org/wiki/Procurement


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