Difference Between Sourcing and Procurement from India

Sourcing and procurement are two important supply chain functions related to acquiring goods and services. However, sourcing and procurement have some key differences in scope and activities when engaging with Indian suppliers.

#Key Takeaways
1Sourcing identifies and vets suppliers, procurement purchases from them
2Sourcing takes a strategic outlook, procurement is transactional
3Sourcing builds relationships with suppliers in India
4Procurement executes orders, payments, and logistics
5Expertise, clear expectations, and streamlined processes enable success

Overview of Sourcing and Procurement

Sourcing involves identifying suitable suppliers and products to meet business needs.

Procurement is the process of purchasing required goods and services.

Key Differences:

  • Sourcing takes a strategic outlook while procurement is more tactical.
  • Sourcing explores options, procurement closes purchases.
  • Sourcing builds supplier relationships, procurement negotiates contracts.
  • Sourcing requires product expertise, procurement focuses on process.

Check out this guide to procurement best practices in India.

Sourcing from India

When sourcing from India, key activities include:

Identifying Reputable Suppliers

  • Research sectors and segments to create a list of reputed suppliers.
  • Leverage networks and visits to find reliable options.

Evaluating Production Capabilities

  • Assess manufacturing infrastructure, capacity, capabilities.
  • Audit facilities, processes, quality systems.

Negotiating Pricing and Timelines

  • Use market data to negotiate fair pricing and payment terms.
  • Agree on production timelines, lead times.

Ensuring Supplier Quality and Compliance

  • Set specifications, quality control expectations.
  • Check certifications, social audits, and regulations.

This article outlines tips for navigating risk when sourcing from India.

Difference Between Sourcing and Procurement

Procurement from India

Procurement activities when buying from Indian suppliers include:

Issuing Purchase Orders

  • Send purchase order with technical specifications and quantity.
  • Define delivery dates, logistics terms.

Managing Logistics

  • Coordinate shipments, customs clearance, and freight.
  • Track status during transits.

Making Payments

  • Arrange payments as per negotiated terms.
  • Manage foreign exchange and remittances.

Monitoring Order Status

  • Follow up on order status with suppliers.
  • Expedite if delays occur.

This guide covers procurement best practices.

Best Practices for Sourcing and Procurement from India

  • Develop close relationships with suppliers over time.
  • Gain expertise in products, regulations, costs.
  • Ensure clarity on expectations before procuring.
  • Streamline documentation and payment processes.

Check out this guide on supply chain best practices in India.

Sourcing and procurement are distinct but connected functions in the supply chain. Sourcing lays the ground for procurement to execute smoothly. Understanding their differences helps engage effectively with Indian suppliers.

Q1. What payment terms are typically offered by Indian suppliers?

Common payment terms are advance payment, payment on delivery, letter of credit, documentary collection. Larger suppliers may offer 30-60 day credit periods.

Q2. How can you ensure transparency from Indian suppliers?

Require regular communication and progress updates. Conduct site visits and audits. Use technology like IoT and remote monitoring for real-time visibility.

Q3. What risks should be mitigated when procuring from India?

Quality issues, delays, payment defaults, contract violations. Conduct thorough due diligence and inspections. Use payments tools like LC. Maintain supplier performance metrics.

Q4. How to resolve disputes with Indian suppliers?

Address issues directly with escalation mechanisms. Have clear conflict resolution terms in contracts. Use arbitration or mediation if required. Build relationships to prevent issues.

Q5. What are some supplier relationship management best practices?

Regular communication. Performance reviews and feedback. Partnering on product development and innovation. CSR initiatives. Cultural sensitivity and rapport building. Executive sponsorship.