Details: Discuss the similarities (if any) and differences (if any) between purchasing, procurement, sourcing and supply management. (90% of words) Provide suitable examples to support your answer. Please provide introduction (5% of words) and conclusion (5% of words)
Introduction
The broad nature of procurement as a subject matter in the operation of a business and the ever changing operating environment has affected many aspects that are associated with procurement that creates need for elucidating similarities and differences evident between and among various aspects associated with procurement. This paper achieves this by taking a stepwise inquiry into the similarities and differences between purchasing and procurement, sourcing and supply management and it achieves this by taking a side-by-side approach in the analysis of facts and relevant philosophical underpinnings.
Purchasing and Procurement
It is not uncommon to find various organizations either using procurement and purchasing interchangeably or using one to imply the other. However this interchangeableness is in many ways a misnomer since the two functions are totally different even though they might share various similarities in execution of their objectives and functions. To better understand the relationship that subsists between purchasing and procurement, it is essential to put each of the two functions in its own context by way of definition, then look at similarities and close the section with differences.
From the perspective of definition, purchasing can be described as the subset of supply chain management and materials management that is concerned with the acquisition of goods and services to fulfill the goals set by the organization. This definition clearly shows that purchasing is part of the organization’s specific objectives and a way to achieve its goals related to logistics, or supply chain management in a specific sense. Therefore the functions of purchasing start at the purchasing department and are exclusively operational activities that begin with identification of need and conclude with tracking of purchasing activities.
Procurement on the other hand entails a broader scope of activities that include strategic considerations as well as tactical considerations. The broader nature of procurement includes purchasing as a part of the functions of procurement. Nevertheless, there have been differing takes on the nature of differences or similarities evident between procurement and purchasing with some authors arguing that the two are interchangeable and that they denote functional activities that most frequently concern flow of materials and information. This notion was extensively supported by Monczka, Trent and Hadfield (Kaufmann (2002, pp. 3–33) who viewed purchasing and procurement as the same thing. Kaufmann (2002, pp. 3–33) also gives support to that notion of interchangeableness of purchasing and procurement.
Despite the differing ideologies about procurement and purchasing, there are several similarities and differences that can be drawn out based on the functions each of them plays. While purchasing activities are concerned with identification of purchasing needs procurement delves in material specifications, material studies and value analysis. In addition, purchasing involves extensive discussion with sales people and identifying suppliers while procurement focuses on market research and the entirety of purchasing activities.
With specific attention to suppliers, purchasing is responsible for selection of suppliers while procurement ensures management of supplier quality and administration of investment recovery. While procurement ensures management of investment recovery purchasing activities include management of purchasing records (Frazelle, 2002). From these assessments, it is noticeably evident that procurement and purchasing are related but are not the same and it would be a misnomer to use them interchangeably. Procurement includes other functions that are not present among the functions of purchasing and these include expediting, traffic and logistics, supplier quality control and also involve all the purchasing activities.
Purchasing and Sourcing
Having highlighted the definition of purchasing and its functions, it would be in order to directly look at sourcing; compare and contrast it with purchasing. Sourcing refers to part of procurement that specifically aims at getting, evaluating and engaging suppliers of goods and services (Trent and Monczka, 2003, pp. 26–36).
Purchasing and Supply Management
Supply management is a function of the supply chain management that entails organizing purchasing activities as well as procurement activities. Supply management also encompasses supplier qualification and selection teams, collaborating and strategic alliances that are aimed at improving the value of the supply chain and entire logistics functions (Bowersox and Closs et al., 2002). In addition, supply management activities also involve monitoring of supply environment to ensure that the organization and especially the supply chain management network is kept abreast with all the relevant information that relate to the smooth operation of supply chain activities and successful interaction between the organization’s supply chain component and other stakeholders or parties in the entire network.
Drawing of strategic materials acquisition plans also lies squarely in the docket of supply management activities.
The activities performed by the two functions can be seen to have a point of intersection hence having a strong relationship. For instance, when the supply management department is tasked with supplier qualification and selection teams, it is upon the duty of the purchasing department to identify the suppliers that should form possible candidates for qualification (Kaufmann, 2002, pp. 3–33).
Moreover, as the purchasing department takes care of keeping the purchasing records and contrast administration, the supply management department ensures corporate planning activities are achieved and that monitoring is continuously carried out for improvement. The differences between supply management and purchasing are inclined toward the way their activities or functions are carried out. Supply management takes care of planning and control of activities that purchasing does (Christopher, 2011). In addition, the activities of supply management are more strategic as opposed to purchasing activities, which are more tactical than strategic.
Therefore the difference between purchasing and supply management is that purchasing takes a tactical focus as supply management leans on strategic focus. The similarity lies in the fact that the two departments deal with the almost same of related functions but only at different levels (Cooper and Lambert et al., 1997, pp. 1–14). For instance purchasing deals with suppliers just as supply management also deals with them but the differentiating factor is that purchasing selects the suppliers while supply management qualifies them and pursues quality monitoring and control. The overriding difference between the two functions is that purchasing can be viewed as and linked to order management hence more of an administrative function (Murray, 2009, pp. 198–202). On the contrast, procurement steps out of the administrative restrictions by moving away from the transactional aspect to the strategic side where it responsible for general gathering of resources.
Procurement and Sourcing
By now, it is evident that sourcing and procurement share a common orientation in that they both deal with strategic side as opposed to transactional aspect (Tan, 2001, pp. 39–48). However the difference between the two as has already been demonstrated in discussion in other sections above, sourcing is a function within procurement and therefore procurement is still broader than sourcing.
Similarly, procurement and supply management share the strategic approach in the logistics and supply chain management arena. They are both detached from the administrative functions performed by purchasing. Sourcing and supply management also have these similarities in that the activities they engage in are more of strategic in nature than administrative functions (Murray, 2009, pp. 198–202).
Conclusion
The difficulty in deciding whether procurement and purchasing are usable interchangeably is not new and has created a genuinely heated debate yet it is evident that the terms are different in several ways. Procurement is broader than purchasing and encompasses purchasing functions within it while at the same time stamps its strategic approach by focusing on the strategic side of logistics. For similarities, procurement and purchasing deal with suppliers at least in one way or another, bringing their functions at an intersection and interdependence.
Reference List:
Bowersox, D., Closs, D. and Cooper, M. 2002. Supply chain logistics management. Boston, Mass.: McGraw-Hill.
Christopher, M. 2011. Logistics & supply chain management. Harlow, England: Financial Times Prentice Hall.
Cooper, M., Lambert, D. and Pagh, J. 1997. Supply chain management: more than a new name for logistics. International Journal of Logistics Management, The, 8 (1), pp. 1–14.
Frazelle, E. 2002. Supply chain strategy. New York: McGraw-Hill.
Kaufmann, L. 2002. Purchasing and supply management-a conceptual framework. Handbuch industrielles beschaffungsmanagement, 2 pp. 3–33.
Monczka, R. M., Trent, R. J., AND Handfield R. B. 1998. Purchasing and Supply Chain Management: Cincinnati
Murray, J. 2009. Towards a common understanding of the differences between purchasing, procurement and commissioning in the UK public sector. Journal of Purchasing and Supply Management, 15 (3), pp. 198–202.
Tan, K. 2001. A framework of supply chain management literature. European Journal of Purchasing \& Supply Management, 7 (1), pp. 39–48.
Trent, R. and Monczka, R. 2003. International Purchasing and Global Sourcing-What are the Differences?. Journal of Supply Chain Management, 39 (4), pp. 26–36.
