- December 27, 2018
More than Purchasing: eSourcing vs Procurement
Sourcing and procurement are terms that sometimes get confused and are all too often used interchangeably with purchasing. It’s important to understand their differences and to appreciate how global sourcing software can aid in the process. In the world of business, eSourcing has had a major influence and provides some distinct advantages.
Before anything is actually purchased, a company must identify what’s available, compare prices, quality, and take into consideration other factors, such as shipping, the reliability of the supplier, and any associated tariffs. The business must also negotiate, manage, and monitor contracts. Sourcing requires obtaining bids, and those bids have to be tracked and compared. Considering the fact that many companies spend anywhere from 50-70 percent of their budget on supplies, sourcing is an essential part of doing business and minimizing costs.
With eSourcing, most if not all of the sourcing process is handled online, usually through a single, centralized hub. Using eSourcing, goods are identified, suppliers are located, and the online system is used to communicate with those suppliers. This allows for an easier consolidation of proposals and simplifies making comparisons.
Procurement is the transaction and compliance part of purchasing. Much like sourcing, procurement is not simply a single step. It requires requisition, authorization, and ordering. Acquiring and cataloging receipts, as well as making payments for the supplies are part of procurement. The counterpart of eSourcing is eProcurement. Much like eSourcing, eProcurement is done electronically.
While procurement and sourcing do go together, there are distinct differences that shouldn’t be overlooked. Sourcing demands an extensive process of analysis to determine pricing, as well as the dependability of a given supplier. It should be obvious that no company wants to enter into a long-term contract with a supplier that doesn’t appear to be reliable. This analysis leads directly into selecting the supplier. Once the supplier has been selected, a contract has to be negotiated. If the contract falls through, another supplier has to be chosen. Finalizing the contract transitions directly into the transaction, which is part of procurement.
The Electronic Advantage
Why has eSourcing become so popular, especially among global companies? There are a number of reasons. First and foremost, it streamlines and simplifies the entire process. Trying to organize and keep track of a multitude of suppliers that are located in multiple countries and across several continents can be challenging. Having a single hub is amazingly helpful for organizing your proposals and suppliers. That alone makes eSourcing worth considering.
It also serves as an easily accessible repository for sourcing information. Having a one-stop-shop for all of the details and particulars for every supplier that you’re considering, or that has already been contracted, is a massive time saver and further aids you in staying organized. The hub also bolsters competition, since it pits a number of suppliers against one another in order to acquire your attention and perk your interest. That’s not a minor thing. This ultimately assists in maximizing supplier competition and lowering prices.
Keep in mind that 50-70 percent number from before. Every business wants to lower overhead and see each dollar go further. Sourcing software can help make that happen. If you’d like to learn more about what eSourcing can deliver, speak with the experts at CBX Software.