Essential in any company, the procurement department requires Sourcing and Procurement in harmony to achieve strategic results.
Outside Brazil, some companies establish a Procurement and Sourcing department to deal exclusively and globally with the purchasing sector. Despite being a single department, they have distinct commitments, responsibilities, and strategies, even though they complement each other. In other words and plain terms, Sourcing and Procurement are the arms of the procurement department.
This concept was brought to Brazil and has caused some confusion. Some people think they are the same thing, but they are not.
A company's procurement department is responsible, among many other things, for supplier contracts. To establish a procurement cycle that ensures process excellence, the procurement department must have full control over the receipt of goods. Therefore, it must be structured strategically. In light of this, investing in sourcing and procurement has become the tactic of major organizations.
The tools and methodologies of procurement departments that use sourcing and procurement in their strategies aim to establish complementary criteria by bringing these concepts together.
But what do these English terms mean? Both relate to the concept of acquiring and purchasing, yet each has a distinct focus and perspective.
Sourcing
Setting the literal translation aside, let's get straight to how the word is used in corporate settings. Sourcing represents the strategies, techniques, and methods used by procurement professionals during material negotiations. In other words, it deals with material quality, costs, and the entire acquisition process within procurement. Naturally, this involves planning and methods aimed at achieving an advantageous purchase aligned with the client's systematic needs, establishing a win-win relationship with the supplier.
It is up to the sourcing professional to conduct research and handle mediation between the client and the supplier, thereby creating an environment to cultivate a strong relationship. Among other aspects, a well-structured sourcing operation provides:
- Lower Costs
- Assertive Purchasing
- Process Agility
- Proposal Diversity
- Expansion of Purchasing Operations
Expanding the perspective slightly, the strategic sourcing methodology has been adopted by large corporations as well as smaller organizations, given the significance of the results achieved.
Procurement
The actions—likewise strategic and methodically calculated—added to sourcing processes to amplify business impact are what the corporate purchasing sector calls procurement.
The transaction record that documents the purchase order, enables the cataloging of supplier history, and establishes a partner relationship is carried out by procurement.
This action, for example, allows for the evaluation of factors such as supplier delivery quality, price variation, and seasonal purchasing volume.
Naturally, technological resources systematized through digital tools are increasingly used to maintain better control and obtain ever more accurate metrics. Beyond benefiting the financial management of transactions, it is a solution that optimizes time and promotes process transparency, while also reducing errors and significant losses.
Other responsibilities that fall under the purview of procurement professionals and complement the work of sourcing include:
- Storing and Archiving Contracts – in this case, the use of digital tools, such as document management software, is the best way to streamline file queries and distribution.
- Receiving Orders – it may seem simple, but this entails evaluating supplier deliveries, as well as verifying quantity, deadlines, and quality standards.
- Auditing what is being delivered against what is contracted.
- Establishing Cycles to Standardize Processes.
- Creating Flexible Contractual Mechanisms.
- Managing all documents on digital platforms.
- Remaining attentive to external factors such as social, environmental, and technological impacts to keep the company's global vision competitive in the market.
It is worth noting that certain external factors are linked to corporate values. Therefore, it is up to procurement professionals to establish processes aligned with these values.
In a scenario where sustainable processes are no longer considered a differentiator, for instance, it becomes more than just a department that liaises with suppliers, evolving into the strategic backbone that supports the business.
