For most of us in "procurement"—whatever that means—words are particularly important to us.  For example, the nuances of a word's meaning in a contract is really critical (at least to us) and we really exercise our grey matter to get the words in a contract just so.

Why then does it seem—or is it just me—that a lot of us in our profession don't really know the differences between the terms purchasing, procurement, sourcing, materials management, supply management, and vendor management?

Our premier trade association in the industry even changed their name—from the "National Association of Purchasing Management" to the "Institute for Supply Management."  They also are changing the name of their certification from "Certified Purchasing Manager" to "Certified Professional in Supply Management."  Does that mean that "purchasing" is a dirty word, sort of like "vendor" instead of "supplier?"  Why is vendor negative or something less than supplier?  At least "vendor" has its root in Latin, which is certainly a better pedigree than what "supplier" has.  Well, that's perhaps a different blog posting...  Back to the topic at hand...

In simple terms, "purchasing" is the act of buying goods or services.  According to ISM's Glossary of Key Supply Management Terms, the definition of purchasing is "A major function of an organization that is responsible for acquisition of required materials, services and equipment."

Apparently, "procurement" is more upscale and means to obtain goods or services that meet the customer's requirements at the lowest cost consistent with appropriate levels of quality and service.  Also, "procurement" means something more than the very specific act of "purchasing," which, according to ISM's definition, includes "specifications development, value analysis, supplier market research, negotiation, buying activities, contract administration, inventory control, traffic, receiving and stores."

According to ISM, "sourcing" is as equally narrow as "purchasing."  "Sourcing" is "[t]he process of identifying sources that could provide needed products or services for the acquiring organization."  I personally call this activity the "supplier selection" process.  But that's just me.

"Materials management" is apparently almost the same thing as "supply management."  Here's ISM's definition: "[a] managerial and organizational approach used to integrate the supply management functions in an organization. It involves the planning, acquisition, flow and distribution of production materials from the raw material state to the finished product state.  Activities include procurement, inventory management, receiving, stores and warehousing, in-plant materials handling, production planning and control, traffic, and surplus and salvage. In spite of a slight difference in meaning, this term is often used interchangeably with Supply Management.  More on that "slight difference" dilemma in a minute...

ISM defines "supply management" as "[t]he identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives."  So where does the "slight difference" come into play?  I'm not sure, because they both look almost the same to me except that ISM defined "materials management" with more specificity.  Although, I do think "supply management" sounds cooler for some reason.

ISM hasn't yet defined "vendor management."  Which is neat, because that means I get a shot at defining it.  Although ISM might not agree with my defintion, here's the definition of a "Vendor Management Office" that I include in my book, The Vendor Management Office: Unleashing the Power of Strategic Sourcing:


I used the terms "purchasing" and "sourcing" because they sound more action-oriented than "procurement."  While I'm grateful to ISM for attempting to define many of the terms of our profession, when it comes right down to it, I'm going to use words that I like, such as "purchasing" and "sourcing" and "vendor management."  Maybe I'm part of the problem...