What is the relationship between the procurement and supply chain management?
I have just stepped into the SCM and it's really hard for me to know the relationship b/w the procurement and SCM. How are they inter-related and what will be the impact on the total process?
Supply Chain Management is a full process, from sourcing, to purchasing, to arranging shipping, to warehousing and goods inwards. It includes disciplines like demand forecasting, inventory management, contract management, and procurement.
Procurement is one part of this, focused on finding the right supplier, negotiating the right terms (including price), and securing contract completion. It usually also includes an element of supplier management, to ensure contract terms are adhered to and the relationship remains beneficial.
Think of procurement as shopping. You also need to know what the household cook is planing to prepare, and when, and how you are going to get the groceries back home, and where you will store them so they keep fresh properly. The whole thing is SCM.
The relation between SCM and procurement will vary in organizations often tied to the how the organization is structured.
An interesting supply chain structure is SCM coordinates the functions of purchasing and logistics. The purchasing part is the paper part of transactions while the logistics part is the physical movement of the paper transactions.
Procurement is a component of SCM. SCM is a much broader scope and will typically include: Production Planning, Forecasting, Logistics, Inventory/warehouse Management, ERP system management and SCM project management.
Your answers below are both excellent.... I would add that the relationship from my experience was based upon JUST IN TIME (JIT), to maintain inventory levels and keep procurement advised as to the needs for purchasing and what is in inventory based upon sales forecasts
My last employer provides a good illustration of the differences. SCM addressed the product supply to retail stores and direct customers. Purchasing or Strategic Sourcing deals with internal purchasing needs and partners with each department to obtain vendors or products they need to do their work. Purchasing worked with me to pick the benefits vendors- they owned the bidding, negotiation and contracting process and I owned the selection and providing subject matter content.
Taking into account the answers offered already I do also see the procurement function evolving as new technologies and better data becomes available, with online real time contract negotiation in SAAS style trading rooms the integration of procurement into the SCM process will strengthen into broader more business integrated processes.