We need to recognize the differences between purchasing and supply management. Purchasing is a functional group (i.e., a formal entity on the organizational chart) as well as a functional activity (i.e., buying goods and services). The purchasing group performs many activities to ensure it delivers maximum value to the organization. Examples include supplier identification and selection, buying ,negotiation and contracting, supply market research, supplier measurement and improvement, and purchasing systems development. We will interchange the terms purchasing and procurement throughout this book.

    Supply management is a broader concept than purchasing. Supply management is a progressive approach to managing the supply base that differs from a traditional arm’s length or adversarial approach with those suppliers who are capable of providing world-class performance and advantages to the buyer. Think of supply management as a progressive and supercharged version of basic purchasing.

    Supply management often takes a process approach to obtaining required goods and services. We can describe supply management as the process of identifying, evaluating, selecting, managing, and developing suppliers to realize supply chain performance that is better than that of competitors. We will interchange the terms supply management and strategic sourcing throughout this book.

    Supply management is cross-functional, meaning it involves purchasing, engineering, supplier quality assurance, the supplier, and other related functions working together as one team, early on, to further mutual goals. Instead of adversarial relationships, which characterize traditional purchasing, supply management features a long-term win-win relationship between a buying company and specially selected suppliers. Except for ownership, the supplier becomes almost