Procurement vs Purchasing
Difference Between Procurement and Purchasing
Definition
Suppliers, Buyers and Stakeholders in general use the words of procurement and purchasing interchangeably. However, there are important differences that cannot be ignored despite their similarities.
In general, we can always say procurement is the overarching term which purchasing is a subset. Procurement starts right at the top with such process as setting the strategic targets, establishing strategic purchases, selecting vendors, establishing necessary terms and conditions, negotiation and final taking in of the goods or service. Purchasing could be simply defined as the actual purchasing or bringing in of the goods or service.
The Procurement Process
The Procurement process involves the entire cycle which sometimes can be referred to the Procure-To-Pay Cycle. A very common flow will involve the following
· Establishing of Requirement Needs
· Raising and Approval of Purchase Request
· Identifying Target Suppliers
· Sourcing
· Receipt of the Quotation
· Negotiation
· Selection of the Best Proposal
· Raising and Approval of Purchase Order
· Sending Purchase Order to Supplier
· Purchase Order Acknowledgement
· Advance Shipment Notice
· Goods Receipt
· Invoice Recording
· 3 Way Matching
· Payment to Supplier
The Purchasing Process
Purchasing is a subset of procurement. Purchasing generally refers simply to buying goods or services. Purchasing often includes receiving and payment as well.
· Raising and Approval of Purchase Order
· Sending Purchase Order to Supplier
· Purchase Order Acknowledgement
· Advance Shipment Notice
· Goods Receipt
· Invoice Recording
· 3 Way Matching
· Payment to Supplier
Conclusion
Using the terms of Procurement and Purchasing interchangeably may lead to confusion and should be avoided. As they are so similar in many ways, it is an unavoidable situation for many stakeholders involved. As a procurement professional however, it is prudent and necessary for professionalism to hold court and create the clear distinction for all.
In summary, procurement should be viewed as a strategic tool and resources to improve efficiency and execution and ultimately the profits of any company in the world.
