Sourcing is the process of finding, assessing and selecting suppliers and agreeing the terms you will buy on. Procurement is the process of buying from those suppliers: raising orders, managing delivery, paying invoices and managing the relationship. Sourcing decides who you buy from and on what terms; procurement makes the purchase happen.
The two are closely linked and often used as if they mean the same thing. This guide sets out where each starts and stops, how they work together, and what a smaller business without a procurement team should do about both.
Quick answers
Is sourcing part of procurement?
In most organisations, yes. Procurement is the wider buying function; sourcing is the upstream part of it that chooses suppliers and sets terms. Some businesses run them as separate teams, which is one reason the two words are often used as if they were interchangeable.
Which comes first, sourcing or procurement?
Sourcing. You need a selected supplier and agreed terms before procurement can place and manage orders. In practice the two run in a loop: what procurement learns about delivery, quality and cost feeds the next sourcing decision.
Does a small business need both?
Yes, even without a dedicated team. Someone has to choose suppliers and someone has to manage orders. Smaller brands often keep procurement in-house and bring in a sourcing partner for supplier selection, factory oversight and quality control in overseas markets.
Sourcing and procurement at a glance
| Sourcing | Procurement | |
| Core question | Who should we buy from, and on what terms? | How do we order, receive and pay, on time and to specification? |
| Main activities | Market research, supplier identification, evaluation and audits, negotiation, contracting | Purchase orders, order follow-up, receiving goods, matching invoices, payment, supplier performance management |
| When it happens | Before the first order, and whenever suppliers are reviewed | Every time you buy |
| Typical output | An approved supplier with agreed price and terms | Goods delivered to specification, on time and paid correctly |
| Measures of success | Total landed cost, supplier capability, supply risk | On-time delivery, quality, cost control, compliance |
| Risk if done badly | The wrong supplier, hidden costs or compliance gaps | Late, defective or overpriced deliveries |
What is sourcing?
Sourcing is the upstream, strategic half of buying. It covers deciding which markets to buy from, identifying potential suppliers, evaluating them on capability, capacity, quality systems and compliance, negotiating price and terms, and contracting. Done well, it lowers cost and risk before a single order is placed.
Strategic sourcing goes further. Rather than choosing a supplier for one order on unit price, it looks at total landed cost, supplier risk and long-term fit, and revisits those decisions as markets change.
What is procurement?
Procurement is the process of buying. Once suppliers and terms are agreed, it covers raising purchase orders, following production and delivery, checking goods and invoices against the order, paying suppliers and managing their performance over time.
The word is also used for the whole buying function, which is why sourcing is often described as part of procurement.
How sourcing and procurement work together
The two overlap and depend on each other. Strategic sourcing gives procurement better suppliers and better terms to work with. Procurement executes the contracts and builds the record of delivery, quality and cost that should shape the next sourcing decision.
Run as one connected process, they can help you:
- Reduce costs
- Improve quality and consistency
- Work more efficiently
- Manage supply and corporate risk
- Stay compliant with regulations in your markets
- Bring new products to market faster
Protect customer experience and brand reputation
Do you need both if you don’t have a procurement team?
Yes. The activities happen whether or not anyone owns them: someone chooses suppliers and someone places orders. The risk for smaller brands is that sourcing is done once, informally, and never revisited, so cost, quality and supply risk drift without anyone noticing.
A practical split is to keep procurement (orders, payments and stock planning) in-house and bring in a sourcing partner for the parts that need local presence: finding and vetting factories, managing samples and production, and checking quality before goods ship.
Where to start with a sourcing strategy
Start with the product and the commercial goal, then find a partner who understands both. Our guide to why you need a strong global sourcing strategy covers the planning in more detail. When you assess a sourcing partner, look for:
- experience in the markets you are considering, such as China, India, Vietnam and Turkey, with established factory relationships
- offices in those markets, so language, time zones and local business practices are not barriers
- colleagues with experience in your product category, whether consumer goods or industrial components
- independent quality assurance that checks goods against your specification before they ship
When to bring in a sourcing and procurement partner
If you buy from overseas factories without a team on the ground, an outsourced partner can run the sourcing side and support procurement where local presence matters. ET2C’s sourcing and procurement services cover supplier selection, product development, production follow-up, quality control and shipping, through teams in China, India, Vietnam and Turkey.
Not sure how exposed your current supply base is? Take the Sourcing Stress Test.
Frequently Asked Questions
ET2C International has supported clients since 2001, from start-ups and e-commerce brands to established manufacturers, with colleagues in seven countries. Read about our experience or get in touch.
