Discuss the following:
As stated in the textbook, purchasing, procurement, and strategic sourcing are terms that been known to be interchangeable in some instances; however, there are some differences that set them apart. Purchasing is defined as the transaction function of buying any good/services, whereas, procurement and strategic sourcing are related to processes. These three areas seem to be getting a lot of devotion in hopes to improve the firms overall efficiency and effectiveness of their supply chain. As defined, procurement concentrates on finding the most affordable suppliers and involves price negotiation, contract management, transaction management, and supplier performance management. Strategic sourcing expands to a broader spectrum than procurement. Its goal is to "build longer-term relationships with suppliers that offer quality, value, a willingness to collaborate and the flexibility to meet changing supply requirements" which focuses on the overall organizational goal (Linton, 2013).
These concepts have evolved tremendously due to the internet. For example, consumers have the power to research products/services, retailers, suppliers, and view orders and deliveries online. In the beginning of e-commerce, firms used electronic data interchange (EDI) technology in order to communicate with their main customers, but it proved to be too costly. As stated in our text, issues associated with EDI increased applications of e-commerce techniques within the procurement and sourcing areas. E-commerce and e-sourcing provide a number of online tools and capabilities for firms to use via internet including: industry analysis and supplier identification, analytical tools, management or RFI/RFQ/RFP processes, requisition and purchase order process, online negotiations, collaboration tools, logistics procurement, project management capabilities, knowledge management, and contract management. The internet has allowed firms to have these tools and capabilities at the touch of a button, which is quite different from past years.
Companies must definitely evaluate their suppliers very carefully and base their selection on a certain vendor criteria. Most important is the supplier's quality. This refers to many areas such as the design quality, product quality, repair quality, dependability, maintenance, product life, etc. In addition, a firm must look at the reliability of the supplier. Will the product be delivered on time? It is important firms look at the history of a supplier to see if there have been any issues in the past with reliability. Risk is also an area that needs to be considered during the selection of a supplier. This could be a number of things including: determining if there are any lead times on deliveries, or potential cost increases if materials aren't available. Capability is also part of the selection criteria. As described in our text, a firm must determine if the perspective supplier is actually capable to supply the material physically, as well as over an extended period of time. In addition, it is extremely important that the buying firm consider the financial position of the potential supplier. You would not want to select a vendor that was in financial trouble. This could be damaging to your firm in the long run. Furthermore, firms should consider desirable capabilities. This would apply to specific desires that a firm would want the supplier to have in order to handle materials/products. Lastly, a supplier's geographical location would factor into the supplier selection. It is extremely important that the buying firm closely evaluate all these criteria's before selection a potential buyer.
Ref:
Linton, I. (2013). Strategic sourcing versus procurement. Retrieved from https://yourbusiness.azcentral.com/strategic-sourcing-versus-procurement-15998.html