Outsourcing vs. Procurement
Edited by Sumera Saeed || By Sawaira Riaz || Updated on September 25, 2023
Outsourcing involves delegating specific tasks or operations to third-party entities, while procurement pertains to the process of obtaining goods or services.
Key Differences
It's possible to see the interaction between outsourcing and procurement in many businesses. For instance, a company might decide to outsource its IT services to a third-party provider. The process of selecting the best IT service provider, negotiating the terms, and finalizing the contract falls under procurement.
Sawaira Riaz
Sep 25, 2023
In contrast, procurement is the process of finding, acquiring, and buying goods, services, or works, often via a tendering or competitive bidding process. Procurement ensures that the company gets the necessary resources at the best possible price, considering factors like quality, quantity, time, and location. It's a strategic function that aims to optimize operations and reduce risks.
Sawaira Riaz
Sep 25, 2023
However, not all procurement involves outsourcing. A company might procure raw materials for its production without outsourcing the production process. Similarly, while all outsourcing requires some procurement process (selecting the third-party provider), not all procurement activities lead to outsourcing.
Samantha Walker
Sep 25, 2023
Outsourcing and procurement are both significant aspects of business management, but they serve different functions. Outsourcing primarily refers to the business practice of transferring certain tasks or functions, which were traditionally performed in-house, to external providers. Companies may opt for outsourcing to save costs, access specialized expertise, or focus on core competencies.
Sawaira Riaz
Sep 25, 2023
Comparison Chart
Grammatical Role
Noun (referring to delegation of tasks)
Noun (referring to acquiring goods/services)
Sawaira Riaz
Sep 25, 2023
Primary Purpose
Transfer specific tasks or operations to third parties
Obtain goods or services
Sawaira Riaz
Sep 25, 2023
ADVERTISEMENT
Scope
Can involve entire operations or just specific tasks
Can be broad (e.g., company-wide) or specific
Sawaira Riaz
Sep 25, 2023
Associated Risks
Dependency on external entities, quality control
Supplier risks, price volatility, delivery risks
Sawaira Riaz
Sep 25, 2023
Strategic Function
Reduce costs, access expertise, focus on core operations
Optimize operations, reduce risks, achieve value
Janet White
Sep 25, 2023
Outsourcing and Procurement Definitions
Outsourcing
Delegating tasks to external entities.
The company considered outsourcing its customer service.
Aimie Carlson
Sep 25, 2023
Procurement
The process of obtaining goods or services.
The department was responsible for the procurement of office supplies.
Janet White
Sep 25, 2023
Outsourcing
Externalizing non-core operations.
Outsourcing the data entry tasks freed up internal resources.
Harlon Moss
Sep 25, 2023
ADVERTISEMENT
Procurement
Securing necessary items via tendering or bidding.
Procurement methods vary based on the item's nature and value.
Sawaira Riaz
Sep 25, 2023
Outsourcing
Contracting work outside a firm.
Outsourcing can offer access to specialized expertise.
Harlon Moss
Sep 25, 2023
Procurement
Acquiring resources for organizational use.
Procurement of quality materials ensured product durability.
Sawaira Riaz
Sep 25, 2023
Outsourcing
Hiring another company to handle certain functions.
The decision of outsourcing manufacturing was strategic.
Sawaira Riaz
Sep 25, 2023
Procurement
Strategic acquisition of essential resources.
Effective procurement strategies can significantly reduce costs.
Sawaira Riaz
Sep 25, 2023
Outsourcing
Transferring in-house functions to third parties.
Outsourcing the IT department saved significant costs.
Sawaira Riaz
Sep 25, 2023
ADVERTISEMENT
Procurement
To get by special effort; obtain or acquire
Managed to procure a pass.
Sawaira Riaz
Apr 01, 2023
Outsourcing
To delegate (a task, function, or responsibility) to an independent provider
"Most retailers outsource the bulk of their manufacturing to Third World countries, where labor is dramatically cheaper" (James Surowiecki).
Sawaira Riaz
Apr 01, 2023
Outsourcing
To relocate or transfer (jobs) to another labor market
"Although the absolute number of jobs outsourced from developed countries to China remains small, the threat that firms could produce offshore helps to keep a lid on wages" (The Economist).
Sawaira Riaz
Apr 01, 2023
Outsourcing
The transfer of a business function to an external service provider.
Sawaira Riaz
Apr 01, 2023
Procurement
(countable) The act of procuring or obtaining; obtainment; attainment.
He was responsible for the procurement of materials and supplies.
I have a lot of experience in the procurement of construction materials and sub-contracts.
Sawaira Riaz
Apr 01, 2023
Procurement
Efficient contrivance; management; agency.
They think it done by her procurement. -Dryden.
Sawaira Riaz
Apr 01, 2023
Procurement
Efficient contrivance; management; agency.
They think it doneBy her procurement.
Sawaira Riaz
Apr 01, 2023
Procurement
The act of getting possession of something;
He was responsible for the procurement of materials and supplies
Sawaira Riaz
Apr 01, 2023
Procurement
The act of sourcing and purchasing.
The procurement team finalized the contract with the vendor.
Sawaira Riaz
Sep 25, 2023
FAQs
Why do companies opt for outsourcing?
Companies might outsource to save costs, access specialized skills, or focus on core operations.
Sawaira Riaz
Sep 25, 2023
Is there a difference between procurement and purchasing?
Yes, procurement is broader, covering the entire process, while purchasing is the act of buying.
Janet White
Sep 25, 2023
Is customer support a commonly outsourced function?
Yes, many companies outsource customer support to access expertise or operate 24/7.
Sawaira Riaz
Sep 25, 2023
How do businesses ensure ethical procurement?
They set guidelines, vet suppliers, and may opt for sustainable or fair-trade products.
Samantha Walker
Sep 25, 2023
What are the risks associated with outsourcing?
Potential risks include quality issues, dependency on third parties, and loss of internal expertise.
Aimie Carlson
Sep 25, 2023
Does outsourcing always mean sending jobs overseas?
No, outsourcing can be domestic or international. Sending jobs overseas is termed "offshoring."
Sawaira Riaz
Sep 25, 2023
Is procurement only about buying physical goods?
No, procurement encompasses acquiring both goods and services.
Sawaira Riaz
Sep 25, 2023
Can a company outsource its procurement process?
Yes, some companies outsource procurement to third-party specialists or procurement service providers.
Sawaira Riaz
Sep 25, 2023
How does procurement add value to a business?
It ensures quality resources at optimal prices, manages supplier relationships, and reduces risks.
Harlon Moss
Sep 25, 2023
Is cost the only factor considered in procurement?
No, factors like quality, supplier reliability, and delivery timelines are also vital.
Sawaira Riaz
Sep 25, 2023
How does technology impact procurement?
Technology streamlines procurement via software, automates tasks, and offers data analytics for better decisions.
Sawaira Riaz
Sep 25, 2023
How do companies manage procurement relationships?
Through regular communication, performance reviews, and renegotiating contracts as needed.
Aimie Carlson
Sep 25, 2023
What roles are integral to the procurement process?
Roles such as procurement managers, buyers, and supply chain analysts are crucial.
Harlon Moss
Sep 25, 2023
Can outsourcing lead to job losses within a company?
Potentially, as tasks moved to third parties might reduce the need for in-house roles.
Sawaira Riaz
Sep 25, 2023
What's a primary concern when considering outsourcing?
Ensuring that the third-party provider aligns with the company's values, quality standards, and objectives.
Sawaira Riaz
Sep 25, 2023
About Author
Written by
Sawaira RiazSawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.
Edited by
Sumera SaeedSumera is an experienced content writer and editor with a niche in comparative analysis. At Diffeence Wiki, she crafts clear and unbiased comparisons to guide readers in making informed decisions. With a dedication to thorough research and quality, Sumera's work stands out in the digital realm. Off the clock, she enjoys reading and exploring diverse cultures.
