Procurement and Sourcing

Procurement is the end-to-end process a business uses to acquire goods and services. It covers requisition, approval, ordering, receiving, and payment, plus contract compliance and spend management. Purchasing is the transactional part of that process: raising purchase orders and processing invoices.

Sourcing is the part of procurement that identifies, evaluates, and selects suppliers and negotiates their terms. It decides who a business buys from and on what terms. The rest of procurement turns those decisions into orders, deliveries, and payments.

For FP&A teams, procurement decisions drive cost of goods sold (COGS) and operating expenses (OPEX). Payment terms set when cash leaves the business, which shows up in accounts payable and days payable outstanding (DPO) and affects working capital. Planners model supplier costs, price scenarios, and supply risk in supply planning, then compare spend to budget to explain variances.