In general usage, the terms Procurement and Purchasing are often used interchangeably. But both of these are quite distinct with different concepts, activities, and tasks. Purchasing can be an aspect of procurement. Procurement involves a much broader scope as compared to purchasing. In this article, we will explore the major differences between Purchasing and Procurement or in short Procurement vs Purchasing.
What is Procurement?
Procurement can be defined as the process of identifying, shortlisting, selecting, and acquiring required goods and services. It establishes a long-term commercial relationship between the buyer and seller. Procurement is a time taking process involving various steps like:
- Market Surveying.
- Finding Potential suppliers.
- Making a list of approved vendors.
- Creating purchase orders.
- Requesting proposals and evaluating bids.
- Comparing successful bidders from economic points.
- Deciding the supplier and negotiating price and terms.
- Receiving goods or services and checking quality.
- Managing contracts and payment terms.
- Record keeping and result analysis.
What is Purchasing?
Purchasing is a smaller subset of the procurement process involving the act of buying goods or services for the organization. The various steps in purchasing are:
- Creating purchase orders and getting purchase requisitions.
- Receiving and checking products and services.
- Releasing payments after verification of products and bills.
Procurement vs Purchasing: Differences
From the above basic definitions of Purchasing vs Procurement, it is quite clear that both processes are quite different from each other. The major differences between Procurement and Purchasing are provided in the table below:
|Procurement related to the activities for acquiring goods and services.||Purchasing relates to specific functions associated with buying goods and services|
|Procurement is the complete process including multiple stages. The entire tendering process, controlling cost, and bid evaluation is dependent on the procurement team.||Purchasing is a sub-set of procurement with fewer process stages. Purchasing team always reports to the procurement team.|
|Procurement is a planned and strategic sourcing.||Purchasing requires little strategy comparative to procurement.|
|Procurement is a structured process involving more than just the transaction.||Purchasing mainly provides importance on the transaction.|
|Skillsets like effective research, good communication, conflict management, maintaining supplier relationships, etc are the core to procurement action.||Purchasing requires analytical thinking, inventory and time management skills.|
|Procurement is a proactive approach to identify and fulfill needs.||Purchasing is a reactive approach following internal needs.|
|Procurement builds a strong relationship with the company stakeholders.||Purchasing is less concerned about the relationship. They are concerned about the transaction.|
|Procurement puts more importance on the item’s value and quality.||Purchasing is more focussed on the price.|
|Procurement is more complicated than purchasing.||Purchasing is less complicated.|
|Procurement involves more number of people.||Purchasing involves fewer people.|
|Procurement is a time taking process.||Purchasing requires less time as compared to procurement.|
|Procurement usually has long-term goals to achieve competitive advantage for the company and thus reducing cost.||Purchasing have short term goals to achieve right quantity material with good quality at the proper time and place at the right price.|
Few more related articles for you..
Technical Aspects Of Equipment Procurement
Steps for the Procurement of Piping / Mechanical items
What is a Framework Agreement?