Supply Chain Management

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Difference Between Procurement and Supply Chain Management

Is there a difference between procurement and supply chain management? There definitely is. They are different yet complementary things that both relate to purchasing and obtaining new products, parts, and materials for a business or other organization. Procurement is the act of obtaining those items while a supply chain management is overseeing the means by which procurement takes place.

Definitions of Supply Chain Management and Procurement

Just so we’re clear on exactly how procurement differs from supply chain management, here are extensive definitions of them.

Supply Chain Management

Supply chains include vendors that offer raw goods, manufacturers that create products, shippers that are responsible for getting those products from one location to another, wholesale distributors that store and sell products, and warehouse workers who receive and move inventory within a single location. Supply chain management is the process of ensuring these widespread entities and people communicate with each other and act smoothly to keep products moving from one place to the next.

Procurement

Procurement includes finding vendors and shippers to work with, negotiating payment terms with them, making those payments on time, creating purchase orders for items, setting up automatic reorder points on everything in your inventory, and ensuring high-quality goods and processes. Procurement is, essentially, the process of getting products and other materials into your warehouse(s) and making sure you get the best possible price for them to keep your business profitable.

As you can see, procurement is all about motion while supply chain management is the oversight of the objects in motion and the movers of those objects.

An Analogy

Here’s an analogy to show how supply chain management and procurement work in harmony.

The supply chain is like a body with a heart, lungs, stomach, veins, and blood. Supply chain management is like the brain, subconsciously assuming responsibility for the upkeep of this system, which is necessary to keep itself alive. Procurement is like the heart pumping blood through the veins to the stomach to obtain food and the lungs to obtain oxygen. Then the blood takes those essential nutrients to various parts of the body to feed all of the vital muscles and organs, which have their own functions to perform.

So supply chain managers are the brains of the organization. While living beings aren’t able to consciously control all of their internal organs, these managers do have to consciously take actions to maintain strong connections between the numerous operations running all around the system. In a sense, they keep the veins free of obstructions and ensure healthy air and food reach the bloodstream and wind up in every part of the body to keep themselves and their entire organization alive. This supply chain management allows the job of procurement to take place on an ongoing basis. Not every part of an organization will necessarily participate in the supply chain management or procurement processes, but they all depend on them to do their own jobs.

Having good supply chain management is how a business procures not only the inventory items it needs to sell to customers, but a successful future for itself!

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