What is the difference between manufacturing and procurement?

Table of contents:

1. Procurement in simple terms.
2. The 3 types of procurement and what they mean…
3. What is manufacturing?
4. What is a straight forward manufacturing process?
5. The difference between them.
6. How they work together.
7. Advantages, and disadvantages.
8. Manufacturing and procurement here at Coler. (video)
9. Want to learn more?

Procurement in simple terms…

Simply, procurement is the process of acquiring goods, services, or works from external sources through a structured and strategic approach. It plays a crucial role in the supply chain, ensuring that you obtain the necessary resources at the right price, quality, and time for you. Effective procurement involves several straight forward stages, including identifying needs, selecting suppliers, negotiating contracts, and managing relationships to deliver value to the your business.

The 3 types of Procurement and what they mean…

The 3 types of procurement are direct procurement, indirect procurement, and services procurement.

1. Direct procurement is pretty straight forward, as it is exactly what it says- the direct purchase of raw goods, machinery, and wholesale goods that directly contribute to the company’s end product to supply you with.
2. Indirect procurement refers to the process of buying goods and services that are not directly used in the production of a company’s main products or services, but are still essential for the business to operate smoothly to meet customers demands. To put it simply purchasing everything a company needs to run its day-to-day operations, except the raw materials or products that go directly into making the goods or services it sells.
3. Services procurement in simple terms is about finding and purchasing services from companies that provide the expertise or work needed for projects. These services help the company carry out tasks like designing new products, building infrastructure, maintaining equipment, and ensuring everything runs efficiently so the consumer is satisfied.

What is manufacturing?

Manufacturing can be defined in many ways. Here, I am simply speaking out the engineering term for manufacturing. Manufacturing is like turning raw ingredients into a final product whether that be a company using plastic, metals, or other materials to make a car. Or, another example which relates to us at Coler may be, banjo bolts, which we have the capabilities to manufacture, at any standard size and are able to work with your team to meet your exact specifications – our specialty is custom sizes of banjo bolts.

What is a straight forward manufacturing process?

In short, the manufacturing process in the supply chain industry is all about using raw materials to make products, and delivering them to where they are needed efficiently and professionally. A typical manufacturing process day-to-day would look something like this. There are 7 main steps of manufacturing which start with the development of the product vision, and secondly, to research the vision. Then designing the product and finalizing its design. Next, creating a prototype. Then, the main part of actually manufacturing the product. Next, a lot of company’s will get feedback on their product, and tests and reviews are carried out. Finally, if the business is happy, the product will be officially released, and supplied to customers.

The difference between manufacturing and procurement.

An often asked question: what is the difference between the two? The terms manufacturing and procurement refer to two distinct processes in business, but they are often interconnected, just like here at Coler. The manufacturing process involves working with products and services procured from vendors and suppliers. Strategic procurement processes are concerned with identifying the best suppliers and ensuring that products reach the manufacturing floor in time. Manufacturing relates to the production, assembly, quality control and maintenance of a product. Whereas, procurement refers to the sourcing, purchasing, negotiating, and logistics of a product. Some of the key differences between them are as follows… Purpose: Manufacturing focuses on producing goods, while procurement focuses on acquiring the necessary materials or services to support production. Process: Manufacturing involves transforming raw materials into final products, however, procurement is about obtaining resources from suppliers. And the focus of each: Manufacturing is more internally focused on operations, while procurement involves external interactions with suppliers.

So how do they work together?

Procurement and manufacturing work closely together in the supply chain industry. Procurement plays a crucial role in ensuring the manufacturing process can operate smoothly. For example, ensuring the correct materials, components and services are utilised to produce finished products/ goods. In the supply chain industry, they work closely together to ensure products are efficiently produced, and most importantly of all, to a high standard. Having an simple yet efficient supply chain is super important to a business/ or company for many reasons. Whether this being to reduce costs, optimise production, or to save business time allowing you to focus elsewhere. So, how do they go hand in hand? Manufacturing provides input on production schedules, and procurement uses this information to source the necessary materials. Procurement deals with sourcing the materials and components required by the manufacturing part of the process. Overall, working together to ensure that the right materials are available, of the right quality, at the right time, and at the right price.

The pros and cons

There are many pros and cons between manufacturing and procurement just like there is everything else, here are just a few…

• One of the main pros of procurement is building stronger relationships with the supplier, which can result in long term partnerships/ relationships. However, one of the cons of this is, by only having 1 trusted supply chain, if anything was to happen negatively to them, the customer/ company could be at a loss of money, service or product, and trust.
• Within manufacturing one main pros is the product availability. Manufacturing allows efficient production of goods, ensuring products are available to meet consumer demand. However, a disadvantage of this is that overproduction, and wasted resources can potentially occur. Due to being designed to meet consumer demand efficiently, there is a risk of producing too many products if demand fluctuates without notice. This leads to wasted resources, and increased storage costs. If the products don’t sell as expected, it can result in financial losses for the manufacturer which again, is a major disadvantage.
• A second advantage to procurement could be the quality improvement. By carefully selecting suppliers and monitoring their performance, organizations can ensure that they receive high-quality goods and services that meet their standards. Although, a disadvantage of this may be that the process of carefully selecting suppliers and monitoring performance can be time-consuming. It requires significant effort to assess potential suppliers. This therefore, could lead to higher costs and delays. Additionally, overly strict quality controls might reduce flexibility in sourcing, potentially limiting supplier options or leading to dependency on a smaller selection of suppliers.
• A second advantage of manufacturing may be the contribution to economic growth. A strong manufacturing sector contributes to national economic growth by increasing exports, driving investments, and fostering business development. although, a disadvantage of this could potentially be the environmental impact. Manufacturing processes often generate pollution and waste, which can negatively affect the environment across the world.

Manufacturing and Procurement here at Coler.

To conclude, our customers satisfaction is our priority. One of our main missions here at Coler is to change the perception of supply procurement, proving it can be done efficiently, effectively, and at a fair price which will leave our customers at ease. We offer a complete supply chain solution to our customers. Our way of working, combining manufacturing and procurement together, minimizes inefficiencies and reduce costs for our customers. This also reduces lead times. We believe in utilising the strength of overseas partnerships and the benefits it brings to us as a business, our customers, the end consumers and the global economy as a whole. Starting at the point of material purchase all the way through the products life cycle to the final destination of our customers desired delivery location. And- for your peace of mind, Coler provides a clear and transparent indication of exactly where it is giving you the ability to discuss changes at any point of its delivery cycle.

Interested to learn more?

Head over to our YouTube channel for more in-depth videos on this subject, and plenty of other information you may be interested in too by clicking the link here. Or alternatively check out our other blog posts for endless information, here on our Coler website!