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Difference between procurement and strategic sourcing

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Whereas procurement involves all activities required to fulfill an organization’s needs, strategic sourcing focuses on improving the sourcing of goods and services. It is, in fact, a more holistic approach to the vendor management aspect of procurement.

Procurement includes all processes associated with need fulfillment. This includes vendor selection, negotiation, contract management, vendor performance tracking, etc. On the other hand, strategic sourcing extends the procurement function to analyze the entire supply network. This includes processes like risk management, supplier economics, vendor relationship management, and value creation.

For strategic sourcing, the total value of procured goods depends on the relationship with the vendor. It also includes spend management and vendor onboarding. Monitoring supplier performances is critical to strategic sourcing and procurement both, and it changes relationship dynamics in the former. In essence, strategic sourcing aims to improve the reliability of the supply chain. This is a step beyond the goals of procurement.

Using procurement software can aid both processes immensely as it is an efficient tool for all steps of the supply chain.

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