Procurement and purchasing are similar terms. Many people use it interchangeably but they do have a different meaning. There are difference between procurement and purchasing in their purpose, the tasks they cover, which people involved, and what they accomplish.
If you ask a layman about procurement vs purchasing, he will tell you that they are one and have the same meaning, but if you ask a purchasing manager he will explain to you how and why there are differences between procurement and purchasing.
Procurement and purchasing are two separate procedure of an organization that both relate to the sourcing and acquisition of goods and services and can often be seen as part of the procurement department.
Let’s understand both process separately.
What you are going to learn?
What is Procurement?
Procurement can be defined as the process of acquiring goods, and services from a third-party vendor through direct purchasing, competitive bidding, or tendering process while ensuring timely delivery of the items with the right quality and quantity. Procurement involves activities such as identification of needs, sourcing, selection, negotiation, ordering, receiving, and payments.
Steps involved in the procurement process are-
- Identify the goods and services that the enterprise requires.
- Finding of potential suppliers
- Submit a purchase request.
- Selecting the right supplier and negotiating the price effectively
- Creating a list of purchase order
- Receive and inspect the delivered goods before entering the warehouse
- Deportment three-way matching
- Approve the purchase invoice and arrange payment.
- Keeping the purchasing record
What is Purchasing?
The purchasing process is a part of the procurement function and focuses on the transactional phase associated with buying goods and services. Purchasing process means the acquisition or direct buying of goods, commodities, and services. It involves activities such as ordering, conduct purchase orders, receiving delivery, and payments.
Steps involved in the Purchasing process are –
- Purchase Order acceptance
- Advanced notice of the Shipment
- Receipt products and services
- Invoice Recording
- inspecting the quality of the delivered products and services
- Conducting the payment to Supplier
We have discussed the basic fundamentals of procurement and purchasing.
let’s discuss differences between procurement and purchasing side by side.
Procurement vs Purchasing
|The end goal of the procurement is to identify the organization’s requirements and fulfil the procurement of those requirements.
|The end goal of purchasing is to arrange the organization’s expenditure and buying goods, equipment, services for the organization.
|Procurement is a strategic and proactive process. It involves a lot of stages of processes which can be time-consuming and costly.
|Purchasing is a reactive process. This process is less complicated and involves few steps.
|Procurement gives more importance to an item’s value than how much it costs.
|Purchasing focuses more on the cost than the value it possesses.
|In procurement, every stage involves several numbers of people, each of them contributing to one of the parts of the whole process.
|whereas purchasing involves a few numbers of people.
|Procurement involves end to end activities that need to acquire all the products and services. It does everything from identifying needs to sourcing, receiving, contact closure, and recordkeeping.
|Purchasing only gets involves only when it’s time to buy new goods and services. Tasks involved in purchasing are ordering, goods receiving, and payments.
|The procurement process focused on developing a long term and win-win relationship with vendors.
|Purchasing focused on making efficient deals for that moment, do not care about a long term vendor relationship.
|Procurement is competitive as it more focused on driving competition among vendors and always allows multiple sources of supply.
|Purchasing is less competitive than procurement since products and services always buy from the same source.
This is how will you distinguish procurement from purchasing.
I an hope, this article “procurement vs purchasing” is helpful for you. Thank you for reading.
Terms related to Procurement vs Purchasing
Materials management makes sure the required materials available are available with the consumer’s demands, thus giving a schedule of costs and resources that the company needs. Material management involves controlling the type, amount, location, movement, timing of the purchase of various materials, etc.
This emphasizes the requirement for adequate materials management and control because even small savings in materials can reduce the production cost very effectively, thus profit increases. Read more about Materials Management >>
Difference between Purchasing and Buying
Both terms purchasing and buying mean to pay money and acquire goods and services. Although many people may be assumed that buy and purchase have the same meaning, but there are delicate differences in their meanings. Buying is a common word that can be used in any circumstance whereas purchase is a formal word used in workplaces, which is generally not used in spoken context.