Purchasing and supply management important difference you must know

Purchasing and supply management is not an entirely new concept to most people. Take a look at the first part, purchasing.

We all undertake purchasing, be it data for your phone, food, clothes etc. purchasing and supply management is one of those things you know hence you do not give it much thought. In business however, it’s another thing.

There is a huge difference between doing something on daily basis and doing it professionally. Let’s look at purchasing and supply management from a professional perspective.

PURCHASING AND MANAGEMENT: HOW EACH WORKS

What is purchasing management?

From an organizational point of view purchasing involves the acquisition of supplies or inputs, that is, raw materials, components, goods and services, needed for the organisation’s activities such as conversion, consumption or resale.

Some organisations have departments that handle this kind of thing, this is where you find the procurement specialists, while in other organizations it is usually individuals or teams from other departments, like finance or production, that end up handling purchasing.

What you need to understand about professional purchasing is that, irrespective of who is doing it, the basic purchasing objective is to buy materials of the right quality, in the right quantity, delivered to the right place at the right time at the right price. These 5Rs are fundamental.

What about supply management?

Supply is the process or act of providing something or making something available, often in response to a customer’s requirement.

Supply management means making sure that everything goes well in the process involving the flow or transfer of goods, services or information from a supplier to a customer.

Supply often happens on a “chain” of activities were outputs of one activity end up being input of another and so on

Here is a practical example; raw materials are supplied to a manufacturer of components, the finished components are supplied to a maker of sub-assemblies or modules, the finished modules or sub-assemblies are supplied to a manufacturer or assembler of equipment, the finished equipment is supplied to wholesaler who supplies retailers, who supply the end user or consumers of the equipment.

Why is this important?

Purchasing and supply management is important since it helps to secure and convert inputs from suppliers into outputs that will satisfy customers

Here is how that is: For starters there are two sides of a supply chain, the upstream and the downstream.

At one end ‘upstream end’, that is, the end of supply chain, we look at suppliers as an important factor because they influence the quality of inputs that go into the making of products and deliveries of services.

On the other end, the ‘the downstream end’, customers’ needs are the driving force behind all organizational activities.

CONCLUSION

This means that purchasing and supply management becomes important if you are to add value to whatever goods or services that you offer to the customers if you are to gain any competitive advantage. Since when it comes to business people pay for solutions and these will depend on the perceived value of your goods or services.