Which statement best describes the relation between Strategic Sourcing and Supply Management?

• A. Strategic Sourcing is a component of Supply Management
• B. Supply Management is a component of Strategic Sourcing
• C. They are unrelated
• D. They are identical functions

Answer: (A)

The idea being tested is where strategic sourcing fits within the overall function that manages purchases and supplier relationships. Supply management is the broader function that covers all activities involved in obtaining goods and services—planning, sourcing, purchasing, contract management, supplier development, and ongoing supplier performance and risk management. Strategic sourcing is a focused, systematic approach inside that broader field. It analyzes what the company spends, researches markets, evaluates suppliers, and designs long-term sourcing strategies to optimize value, negotiate better terms, and drive total cost of ownership improvements. Because this is a specialized process that operates within the larger discipline of supply management, it’s best understood as a component of supply management rather than the same thing, unrelated, or the other way around.