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The Difference Between Procurement & Supply Chain Management

Procurement and supply chain management operations may sound similar, but most companies have kept these business functions separated from one another. Increasingly, companies are finding that it could be more efficient to merge these functions.

What is Procurement?

Procurement operations our focus on acquiring essential goods and services for an organization while optimizing spending. Procurement operations typically include sourcing, ordering, payments, and reconciliation.

Procurement managers typically develop a panel of approved providers and sign contracts with these vendors based on deadlines and budgets. After vendors provide agreed upon goods and/or services, they are then paid according to terms laid out by business contracts.

Procurement is a business function that has been around for decades, but that doesn’t mean it is old fashioned four out of date. Modern procurement software makes it easier for organizations to have high levels of visibility and control. These platforms often have automated features that significantly increase efficiency while maintaining the essential procurement of goods and services.

Because it involves spending significant amounts of money and it acquires the goods and services and organization needs, the efficiency of procurement operations has a major impact on the overall health of an organization.

What is Supply Chain Management?

Supply chain is a term used to describe the flow of goods and services from providers to end users, and supply chain management is the business function that oversees this flow for an organization. Essentially, supply chain management begins where procurement ends.

While supply chains are driven by the flow of materials and services, the flow of information it is also vital to supply chain operations. Both materials and information flow in both directions: up and down the supply chain. Modern technology makes the flow of information highly current and accessible. Supply chains often become disrupted by unforeseen challenges, such as natural disasters, and the flow of information is vital to meeting these challenges.

Most modern supply chains rely on cloud-based software. These platforms can offer a visibility into almost every area of a global supply chain. Many of these platforms also leverage the latest technology in the form of automation, analytics, machine learning, and decision support tools.

The Convergence of Procurement and Supply Chain Operations

While many organizations separate procurement and supply chain operations, a growing body of evidence is showing that combining these operations leads to lower costs and greater efficiency. Companies that combine these business functions also tend to perform better when it comes to risk mitigation, customer satisfaction, customer retention, spend optimization, resiliency, and vendor relationships.

Organizations with separate procurement and supply chain functions should consider realizing these benefits by combining operations.

We Can Support Change in Your Supply Chain Operations

At ZDA, we stay on top of the latest supply chain developments so as to better serve our clients in the industry. Our recruiters pride themselves on having industry experience and expertise, making us the provider of choice for many small Fortune 500 companies. If you would like to learn more about how we can support your organization’s modern supply chain, please contact us today.

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