Supply Chain vs. Procurement
In procurement, businesses and industries place different value on different aspects of procurement benefits.
While one business may desperately need paperless procurement, another may be more focused on managing supplier relationships. With so many different solutions out there, the actual meaning and scope of both supply chain and procurement are sometimes lost in repetitions.
Focusing specifically on procurement as the “Procure-to-Pay” or P2P process, let’s look at the relationship of supply chain and procurement.
Supply Chain is the movement of goods. So supply chain includes many different moving pieces, including procurement. There are many “links” in the supply “chain,” including the first handler of raw goods through the selling, marketing, creation, distribution, and delivery of goods comprises a link in the supply chain. Many supply chains are very extensive and, of course, each supply chain is unique to the goods the business supplies.
Though procurement is just one piece of the supply chain, procurement itself is made up of a series of moving pieces. Procurement is essentially the process by which businesses request, track and purchase the goods they need.
Here is a simple, typical procurement process:
- Need for Goods
- Search for Goods
- Request Goods
- Approval Workflow
- Purchase Order is created for Vendor
- Order Fulfilled
- Goods Receipt is Created Upon Delivery
- Procurement Strategy
- Analysis of Effectiveness
Being able to define procurement will help you to measure your own company’s procurement effectiveness.
Why is Procurement So Important?
Procurement is a key component of business that intertwines with many other business functions. Businesses rarely make enough revenue to compensate for out-of-control spending, so having insight into the way your organization spends money is vital to the health of your organization.
With procurement you can easily see where your organization spends money- which categories, which suppliers, which contracts, etc. With a procurement platform like Vroozi, which tracks your purchase orders, good receipts, and invoices, you can easily find inaccuracies and directly communicate with suppliers through the platform.
Online procurement platforms are becoming increasingly popular for businesses of all sizes as the technology improves and costs decrease, meaning the savings and benefits far outweigh the costs.
That being said, the importance of procurement extends beyond the bottom line. Procurement helps businesses strategize, maintain relationships, and accomplish company initiatives. For example, your procurement platform can help you see which suppliers are owned by suppliers with the same social goals. The ability to interface directly with suppliers through a procurement platform builds relationships and opens the door to better, faster communication.
Procurement plays a key role in so many different business functions. Taking control of procurement will ultimately affect every other department in your business. While procurement technology was once only available to massive corporations, now businesses of all size can afford cloud procurement.
To learn more about how procurement fits in your company’s strategy and processes, check out the Vroozi Purchase Manager.