Procurement, Sourcing, and Purchasing: How Are They Different?

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Imagine an business navigating its daily operations. The company’s success hinges on a seamless supply of materials, products, and services. This is where procurement takes centre stage. Procurement functions as the business’s strategic backbone, ensuring that all necessary resources are acquired efficiently and cost-effectively. It’s the thoughtful planning that keeps the wheels of the business turning without unnecessary delays or expenditures.

Next, the focus shifts to sourcing. Think of sourcing as selecting the best partners for the journey. The company seeks out reliable suppliers who offer high-quality products at competitive prices. Sourcing involves finding vendors and building lasting relationships to ensure consistent support and value.

Finally, there’s purchasing. With the plan set and the suitable suppliers identified, it’s time to execute. Purchasing involves placing orders, processing payments, and receiving the goods. It’s where the planning and partner selection come together to meet the business’s needs.

In this article, we will explore how procurement, sourcing, and purchasing differ and how each plays a vital role in a business’s success.

What Are the Key Differences Between Procurement, Sourcing and Purchasing?

While procurement, sourcing and purchasing are interconnected, they serve different purposes within a company’s supply chain management. Below is a table that breaks down the differences between procurement, sourcing, and purchasing:

AspectProcurementSourcingPurchasing
DefinitionThe overall process of acquiring goods and services needed by a business. It includes everything from planning and finding suppliers to managing contracts and making purchases.The specific part of procurement focused on finding and evaluating the right suppliers to provide what the business needs.The actual act of buying the goods and services, including placing orders, making payments, and receiving products.
FocusBig-picture strategy to get the best value for the company while meeting all its needs.Finding the best suppliers who can provide quality products at the right price and time.Ensuring the business gets the products or services it needs, when it needs them, by completing transactions.
TimeframeLong-term planning that happens continuously.
Typically happens before any actual buying takes place; it’s proactive.
Happens as needed, based on the immediate requirements of the business; it’s reactive.
ObjectiveTo manage the entire supply process efficiently and cost-effectively.To secure reliable suppliers who can deliver consistent quality and value.To complete purchases quickly and accurately to keep business operations running smoothly.
Real-Life ExampleA restaurant chain wants to ensure it has a steady supply of fresh ingredients at the best prices. It sets up a procurement strategy to manage all its food supplies, from choosing vendors to managing contracts.The restaurant chain looks for the best farms and food suppliers. They evaluate different suppliers based on the quality of produce, delivery times, and pricing, then decide who to work with long-term.The restaurant manager places an order for vegetables with a chosen supplier, pays the invoice, and receives the delivery to use in the kitchen.
Key Activities– Needs assessment.

– Supplier sourcing and relationship
management.

– Contract negotiation and management.

– Purchase order management.

– Receiving and inspection.

– Payment processing.

– Inventory management.

– Risk management.
– Cost control and optimisation.

– Procurement reporting and analytics.
– Researching suppliers.

– Negotiating terms.

– Selecting suppliers.
– Placing orders.

– Processing payments.

– Receiving and inspecting goods.
ImportanceEnsures the business gets the best overall value and manages risks effectively.Ensures the business works with suppliers that can reliably meet its needs over time.Ensures the business has the necessary goods or services on hand when they’re needed.

In a nutshell, procurement, sourcing, and purchasing are like different pieces of a puzzle that come together to help a business get what it needs. Procurement is the big-picture strategy that keeps everything on track; sourcing is about finding the right partners to work with, and purchasing is the final step where the business buys what it needs.


Whether you’re managing a very large, large, medium, or small enterprise, mastering procurement is key to your success. Plan strategically by using procurement management software that eases your operations. Sign up here, and enjoy a 30-day free trial.

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