Every engineering project accomplishment is a result of efficient management of procurement and supply chain operations. It includes a wide array of activities responsible for order fulfillment while maximizing profit and achieving customer satisfaction. Often, supply chain management and procurement are confused with being identical, but there are significant differences between the functionalities of both terms. The supply chain comprises control of the overall production flow of goods and services from raw components to finished goods and successful delivery. In contrast, procurement deals with a single aspect of the entire supply chain operations holding an enormous impact on quality, cost, and other activities.
This blog will explain the definition, role, and differences between procurement and supply chain management. It's essential to understand the differences between these two terms as it allows for more precise communication with stakeholders and enables better leverage of the benefits of both operations.
What is Procurement?
Procurement is the management operation looking after the sourcing of required goods and services to support the business to achieve its objectives. The Chartered Institute of Purchasing and Supply (CIPS) defines procurement as “Procurement is the business management function that ensures identification, sourcing, access, and management of the external resources that an organization needs or may need to fulfill its strategic objectives.”
Procurement is one of the integral parts of the supply chain management process. The procurement managers identify the procurement needs, plan the entire procedure, run RFPs and RFQs for qualified supplier selection, keep a check on pricing & quality, and deal with waste management. Elimination of wastage in the procurement process and responsibility for optimizing the process for enhanced efficiency also lie with the procurement manager. Another essential component of the procurement procedure involves verification of goods received, sorting and organizing goods for further processing, receiving the invoice of the goods/services, and payment to the vendor.
In an engineering setup, procurement is the most vital part of the organization because manufacturing and acquiring goods is a continuous process. Procurement directly impacts the schedule, quality, costs, and timely delivery of goods. Any delay in the procurement of goods/services may disrupt the entire supply chain process.
What is Supply Chain Management?
Supply chain management comprises a network of suppliers and vendors supporting procurement, operations management, and other activities to transform raw materials into finished goods and successfully deliver them to retailers or consumers. The centralized management looks after the flow of all the associated processes, including sourcing raw materials, production, distribution, and returns. The image below provides a deeper understanding of supply chain management operations and the role of procurement in the process.
Supply chain management (SCM) involves managing, planning, and controlling the supply of a product from where it is sourced to the point of sale. SCM plays a vital role in ensuring customer satisfaction through on-time deliveries and the quality of goods/services. An efficient supply chain management also reduces operating costs, forecasts demand and supply, maintains sufficient inventory levels, controls production rates, manages warehouse and transportation and returns of goods. The supply chain managers monitor day-to-day activities, ensuring all the parts of the supply chain are working in synchronization. The supply chain managers constantly look for any discrepancies in the procedure and optimize the operations for higher profitability and reputation.
Differentiation Between Procurement & Supply Chain Management
Procurement is getting goods and services the organization requires to manage the operations. In comparison, supply chain management provides the infrastructure necessary to obtain those goods. Inventory management and availability, demand forecasting, logistics operations, buying decisions, tracking best-suited strategy for the overall management of business operations come under SCM, and procurement is a part of it. Procurement focuses on the procedure's input side, while SCM focuses on output and customer experience. Moreover, procurement managers try to acquire goods at competitive pricing to reduce the cost of final products, while SCM ensures proper management of all the associated operations.
Importance of Procurement & Supply Chain Management in Engineering Sector
Procurement and supply chain management are the cornerstones of an efficiently operating business. Engineering industries require a smooth process flow to ensure timely production and delivery. Procurement plays a vital role in ensuring the availability of production materials with required specifications and amounts. Any deviation in the specification of the procured materials is not tolerable as it may hamper production quality and process. Apart from the timely availability of raw materials, procurement managers are also in charge of establishing a reliable vendor and supplier base from different industries. So that whenever any customizations or enhancements in products are required, the availability of necessary components or raw materials can be ascertained. Negotiation, risk management, supplier performance check, component specification analysis, and eliminating cost drivers are essential aspects of procurement for the engineering sector.
It's important to note that all these procedures in procurement management are backed by efficient supply chain management. Logistics, route planning, inventory management, delivery of goods at the desired place on required time, workforce management, and overall performance optimization are all conducted under supply chain operations. Procurement and supply chain management work together to ensure the uninterrupted functioning of the facility.
Let ESSNPS Assist you with Sourcing Engineering Goods
The growing complexities in the engineering industry are increasing the need for businesses to stick to their core competencies and source other requirements. However, finding a reliable supplier partner for efficient supply chain management is a big challenge for many manufacturers. At ESSNPS, we provide industrial sourcing services for various engineering sectors, ensuring quality and on-time deliveries through efficient logistics. From identifying a suitable supplier to assisting with vendor-related services and providing contract sourcing service, our professional experts and engineers can help your business manage a seamless supply chain. With over a decade's experience in managing the sourcing of engineering goods, we ensure optimum customer satisfaction. Are you looking to source engineering goods? Send in your requirements at firstname.lastname@example.org, and our team will contact you shortly!