Sourcing vs Purchasing
In some industries, sourcing is considered a core operational process that is important to a firm's competitive advantage. A firm that finds superior partners, negotiates lower prices and pushes suppliers to perform may be able to establish cost, quality and speed advantages over the competition.Purchasing can also be considered strategic but not always. In many cases, purchasing is more of an administrative process concerned with financial controls. For example, purchasing includes indirect procurement such as purchases of office supplies that aren't considered relevant to business results. In many cases, purchasing is a routine process of ordering that is guided by sourcing models and agreements.Example
An organic food company that is committed to sustainability has a sourcing process that involves visiting the premises of major suppliers as part of basic due diligence before signing supply contracts. Once a supplier is signed, purchases from that supplier are a matter at filling out order forms and obtaining internal approvals.| Sourcing vs Purchasing | ||
Sourcing | Purchasing | |
Definition | The process of managing suppliers. | The process of acquiring goods and services. |
Tends to be | Strategic | Administrative |
