What is the Difference Between Procurement and Purchasing?

While the terms are often used interchangeably, procurement and purchasing are two different things.  We know it’s confusing, so we bring you this post!

If you’re wondering, “what is the difference between procurement and purchasing”, hopefully, we’ll be able to help you stop scratching your head with what we’ve offered here.

Procurement – the strategic edge

There’s a lot more to procurement than meets the eye.  Encompassing vendor selection, the establishment of terms, vendor vetting, contract negotiation, and purchasing, procurement is purchasing plus.  Procurement’s job to create the conditions necessary for the goods and services your company buys to be optimized.

Purchasing is, in fact, a facet of the procurement process but the effectiveness of purchasing is amplified by the work of procurement.

What that means in business terms

Strategic sourcing is at the heart of an effective procurement leader’s efforts.  Effective procurement establishes stability in the supply chain by vetting vendors for supplier sustainability, minimizing the eventuality of interruptions and ruptures in the vital chain that gets the goods you need to your company.

Procurement combines several business functions that make it a vital part of any business, ensuring supply chain stability and setting favorable contractual terms via the contractual terms and pricing.

Corporate strategy

There are 4 pillars undergirding corporate strategy:

• Company capabilities
• Management issues
• Market placement
• Corporate identity

While perhaps the link isn’t immediately obvious, procurement embraces all 4 pillars.  For example, your corporate identity may hinge on sustainable practices.  If that facet of your identity isn’t readily apparent in your supply chain and procurement activities, you may have a public relations exposure on your hands.  Today’s consumer is highly aware, and sustainability is top of mind in the prevailing market.

Procurement also reflects your market placement, which in turn reflects your corporate brand and what it stands for.  Customers want to be associated with a brand which reflects their values and honors them.  Your dedication to the integrity of your market placement is readily seen in your vendor selection.

Having the right people in place (which is a management issue) is crucial to projecting to the market your brand philosophy.  These are the human resources who ensure you’re on track and modeling fidelity to corporate vision.  Their capabilities are your company’s.

Purchasing – the transactional end

In sum, procurement is in the vanguard of corporate strategy, governing purchasing by optimizing it and making it work for your company, strategically.  So, purchasing is part of the procurement process, not to be confused with the process itself.  Creating the conditions for effective purchasing, procurement is a finely-tuned, process-oriented system.

While business terms are often used indiscriminately, these are two distinct functions. Think of it this way:  purchasing is the transactional end of the procurement function, which is intimately related to corporate strategy.  Procurement gives birth to effective, strategic purchasing.

We hope that helps!

CenterPoint Group is a trusted procurement leader deploying the power of numbers to obtain supply chain stability and enhanced purchasing muscle for our members.  Contact us.

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source http://centerpointgroup.com/what-is-the-difference-between-procurement-and-purchasing/

Must-Have Attributes of Successful Procurement Leaders

Procurement is a highly specialized field, so it logically follows that there’s a specialized set of skills and attributes which comprise successful procurement leaders.

Generic terms don’t adequately describe these attributes, so we’ve put together this list of must-have attributes of successful procurement leaders to clarify and inform.

Change agent

Strictly speaking, it’s not enough for a procurement leader to embrace change.  The job is one which is intended to drive change.  Ideas and innovation flow from an effective procurement leader which enhance procurement process efficiencies, amplify the role of strategic sourcing, shore up supplier sustainability and lead to effective procurement practices, overall.

Shifting procurement from a tactical function to a strategic function which is sited in the supply chain is no mean feat.  It demands a steady hand and a leader who’s able to remain calm and focused in the eye of the hurricane. Part of being an agent of change is having the ability to influence those in the top tier of the company’s hierarchy, as well as stakeholders with an interest in the procurement process.

True leadership

Leadership is no longer a matter of domination.  The true leader is focused on fostering collaboration and participation.  Millennials are poised to become a driving force in the workplace. And what we know about the Millennial approach is that it’s most at home in horizontal structures – not autocratic, top-down rule.

This approach relies on open lines of communication which run both ways.  

True leadership implicates people throughout the organization, getting them on board and honoring their contributions to arrive at a truly beneficial procurement process.

The listening ear

Listening leaders are the leaders who get things done.  Their ears are to the ground, listening to what internal stakeholders have to say.  There are ideas to be had and they’re often very good ones.

Leading from behind may sound counter-intuitive but it’s a leadership strategy which is gaining increasing currency.  Listening is at the heart of this, absorbing the information heard and giving everyone involved a voice and the dignity of input.

Procurement of specific expertise

Finally, it’s imperative that successful procurement leaders come to their roles with the procurement specific expertise that spells “credibility”.

Expertise in category management which delivers on the promises of strategic sourcing is key.  Results that speak for themselves ups the viability of candidates who come to you with this attribute.

Problem-solving and keen negotiation skills are obviously valuable attributes, but professionals with procurement-related technology experience come out at the top of the heap.

CenterPoint Group is a trusted procurement advisor.  Contact us.

The post Must-Have Attributes of Successful Procurement Leaders appeared first on Centerpoint.

source http://centerpointgroup.com/must-have-attributes-of-successful-procurement-leaders/

Key Differences: Strategic Sourcing vs. Traditional Purchasing

Strategic sourcing is the name of the game for procurement professionals.  It differs materially from traditional purchasing in that it works to intentionally create value and gain a competitive edge.

Creating value isn’t all about cost-per-unit.  This is the traditional metric for building a supply chain.  But strategic sourcing acknowledges that there are other key considerations in the realm of vendor selection.  An effective procurement process factors in supplier sustainability to create stability in the supply chain, which adds value by ensuring that you have what you need when you need it, without links in the chain crushing your company’s best-laid plans.

The strategic advantage

Any seasoned procurement leader will happily tell you that strategic sourcing has a strong advantage over traditional purchasing.

And the heart of that advantage is the quality of the buy-vendor relationship. 

By working in a mutually beneficial relationship which acknowledges the core competencies of vendors and leverages them accordingly, supply chain partners and buyers become an interdependent reality, adding value and offering bottom line efficiencies.

Traditional purchasing, with its focus on unit cost, overlooked the intrinsic value of approaching vendor-buyer relationships strategically – creating synergies which serve both parties and creating collaborative opportunities which serve the same purpose.

The raw differences

There are several key categories which point out the raw differences between the two approaches.

The first is cost.  Strategic sourcing sees the big picture, acknowledging the importance of items like overall value and total cost of ownership, going well beyond the traditional purchasing cost-per-unit model.

Traditional purchasing’s focus on unit cost is geared toward obtaining products at the lowest possible price in order to pass on superior discounts to end customers.  Strategic sourcing goes further than that, putting quality in the mix while considering cost-per-unit.  Low cost + high quality = happier buyers.

Strategic sourcing’s reach is also wider than that of traditional purchasing, sourcing vendors further afield to achieve its ends.  The traditional model keeps its vendors close to home.

But it’s the relationship between the buyer and supply chain partners that genuinely distinguishes strategic sourcing.  It’s more than just a casual thing.  The relationship becomes one which is sustained over time, as the two parties find new ways to work more effectively together and to sustain the relationship to the advantage of them both.

Finally, traditional sourcing reacted to ruptures in the supply chain and other deficiencies, while strategic sourcing nips problems in the bud proactively, effectively preventing them and the cost associated with them.

Are you the exception?

To conclude, we’re going to be upfront and admit that strategic sourcing has a price tag attached which is higher than that of traditional purchasing.  If your company is smaller, it may not be the way forward for you at this time.  But larger companies are compelled to consider this model of procurement.  It works well for organizations with several physical plants which require goods and services unavailable from local suppliers.

CenterPoint Group is a trusted procurement leader, leveraging the undeniable power of collective indirect spend for our members.  Contact us.

The post Key Differences: Strategic Sourcing vs. Traditional Purchasing appeared first on Centerpoint.

source http://centerpointgroup.com/key-differences-strategic-sourcing-vs-traditional-purchasing/

Starting at the Source: Sustainability in Supply Chains

There is no issue more compelling in our times than that of sustainability.

This applies to supply chains directly.  Companies are increasingly called upon to respond to consumer demand by examining every corner of their operation, from paper and utility consumption to the supply chain.  Not doing that can lead to courting disapproval in the market and that disapproval can be a public relations nightmare.

This post addresses starting at the source:  sustainability in supply chains. Let’s read more about this increasingly pressing need and how it can be built into your supply chain.

Reconciling mission with reality

Another factor in the growing rush to respond to consumers seeking sustainability is corporate mission statements.  Many companies are building sustainability into these. So reconciling mission with reality is crucial.

When consumers note that your walk doesn’t mesh with your talk, there’s trouble ahead.

The procurement process and supplier sustainability within that process is a key area which can serve the need for integrity in the mission.  That’s something today’s consumer actively seeks out and genuinely appreciates.

Making sustainability a priority in your strategic sourcing game adds value, undergirding corporate mission with real world action that gives you an edge in the market.  All too often, companies pay lip service but fail when it comes to their purchasing game.

A competent procurement leader knows this and acts, to create an effective procurement process which delivers dividends by enhancing public profile.

Reducing impact

Strategic sourcing is about much more than the cost of the items being purchased.  Where were these items made? Who made them? What are these items made of? These are all questions which should be firmly entrenched in procurement’s practices to ensure that you’re meeting the contemporary benchmarks for sustainability.

Reducing the impact of your purchasing means looking at the environmental costs of materials, packaging and production.  But it doesn’t end there. You also need to know what the human cost of your production is. Are your products ethically produced and are workers treated with dignity and fairness?  Those are key questions you need to answer.

Innovation in the area of sustainability is burgeoning, so shoring up the integrity of your supply chain in this regard is becoming easier.  Products are now being made in more energy-efficient ways, with reusable and recyclable materials.

That’s why your supply chain holds the key to reducing your carbon footprint and bringing your operations in line with your mission.

Supply chains – key opportunities

Supply chains present key opportunities to create a more sustainable commercial presence.  It’s at the supply chain level that 80% of greenhouse gases are produced and 90% of environmental impacts reside.  It’s therefore imperative that sustainability in the supply chain be actively pursued, inviting innovation through collaboration with your vendors.

CenterPoint Group leverages the power of numbers, pooling the resources of our members to create the muscle they need to reduce costs and streamline their procurement processes.

CenterPoint can help you create a more sustainable supply chain.  While you look great, the planet gets a break.

The post Starting at the Source: Sustainability in Supply Chains appeared first on Centerpoint.

source http://centerpointgroup.com/starting-at-the-source-sustainability-in-supply-chains/