What Is The Difference Between Procurement and Purchasing?

Procurement is a tricky term often confused with purchasing. But in reality, they are both quite different. This document is for individuals interested in learning what the difference is between procurement and purchasing.

1. What Is The Difference Between Procurement And Purchasing

2. People often use the terms   purchasing   &   procurement   interchangeably

3. But even though they sound similar, they’re definitely different

4. Procurement is concerned with acquiring ( procuring ) all of the goods, services and work that is vital to an organization. 

5. Purchasing is a part of procurement

6. Procurement is considered a core part of any organization’s corporate strategy

7. As a quick refresher, our friends at  entrepreneurial-insights.com  have published a particularly lucid explanation of the facets of corporate strategy.

8. Facets of corporate strategy

9. Company identity attempts to address these questions: What does our company want to do? What does our company stand for? Does our company have any specific ethical beliefs that will determine our business model?

10.  Market placement attempts to address these questions: Who are our customers? What do they want? What do they believe in?

11. Company capabilities attempts to address these questions: What are the strengths and weaknesses of our company? Do our strengths support the long-term goals of the company? How do we want to grow the company?

12. Management issues attempts to address these questions: Do we need to hire / develop talent to lead the business to the goal we’ve established? Does the company have the resources (equipment, real estate etc.) needed to support the long-term goals of the company?

13. This is a great breakdown of corporate strategy because procurement touches each of these components

14. If your business is building (or has built) its identity around an environmentally conscious ethic, than your procurement strategy must reflect that decision 

15. Customers are, without a doubt, attracted to the philosophies and practices a business uses.

16. Steps in the procurement process • Identification of Requirement • Authorization of Purchase Request • Final Approval of Purchase Request • Procurement • Identification of Suppliers • Inquiries • Receipt of the Quotation • Negotiation • Selection of the Vendor • Purchase Order Acknowledgement • Advance Shipment Notice • Goods Receipt • Invoice Recording • 3 Way Match • Payment to Supplier

17. Using purchase orders (especially those generated by an e-procurement software solution) is critical, regardless of the size of your organization. Don’t simply use your credits cards and save the receipts. Don’t rely on emails .

18. The purchasing process • Purchase Order Acknowledgement • Advance Shipment Notice • Goods Receipt • Invoice Recording • 3 Way Match • Payment to Supplier

19. Purchasing , then, is a subset of procurement . And as we’ve outlined, purchasing generally refers to buying goods or services. Purchasing often includes receiving items and payment as well.

20. Unlike the entire procure-to-pay cycle, the steps explicitly related to purchasing should not be tailored to suit the size and scope of each individual business.

21. Remember! P urchasing is a process within the overarching procurement process.

22. Conclusion : Procurement deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of importance to an organization. Purchasing , however, is the process of how goods and services are ordered. It is usually described as the transactional explicit function of procurement for goods or services .