In business, it’s expected to see and hear individuals use the terms ‘procurement’ and ‘purchasing’ reciprocally. In reality, these two things are separate, however firmly related. When does purchasing become procurement? Isn’t all purchasing procurement? And what are the standard procedures for each? It would all be able to be a little confusing.
If you’re beginning to go cross-eyed, fear not! We’re here to assist you with separating it. Let’s dive deeper into the idea of ‘procurement vs purchasing’, and see how they differ from one another.
Procurement is the procedure of distinguishing, shortlisting, selecting, and acquiring appropriate services or goods or works from a third-party vendor through direct purchase, competitive offering, while guaranteeing timely delivery in the right quantity and quality.
Below listed steps consist of an end-to-end procurement process:
- Identification of the requirement
- Approval of the Purchase Request
- Endorsement of the Purchase Request
- Identification of Vendors
- Inquiries or Receipt of the Quotation
- Negotiation of the contract
- Selection of the Supplier
- Purchase Order (PO) Acknowledgement
- Advanced Notice of Shipment
- Receipt of Goods
- Recording of Invoice
- Three-way matching
- Payment to the supplier
What is purchasing?
Purchasing is the arrangement of functions related to acquiring the goods and services that an association requires. Purchasing is a small subset of the more extensive procurement function. This process incorporates activities like ordering, receiving, expediting, and fulfilling payment.
Purchasing process includes the following steps:
- Acquiring a purchase requisition
- Requesting proposals and evaluating quotations
- Dispatching official purchase orders
- Receiving products and services
- Checking the quality of delivered items
- Effecting payment to vendors
Procurement vs. purchasing: Head To Head Comparison & Similarities
Procurement and purchasing are two procedures that are done during the process of acquiring services and goods for an association. However, they vastly differ in their approach and method.
Both Purchases vs Procurement are well-known choices in the market. The Following are some of the major Difference Between Purchase vs Procurement
The key difference between the two: Procurement, as discussed earlier, is a more extensive term that incorporates designing, sourcing, processing, negotiating and fixing standards, though the purchase is a basic and a brief term which will consolidate providing of the money for products or the goods. It very well may be concluded that purchase is one of the aspects of procurement.
Another key difference between Purchase vs Procurement is the way that purchase is viewed as an informal and casual term, to the other side procurement will be considered as an all the more proper business term.
A purchase is a kind of procedure that we share each day. We would go out and purchase the stuff we need, regardless of whether the stuff is cheap or small and costly or big. However, despite what might be expected, the term procurement will be mainly utilized in the corporate or say in the business.
Purchase or buying is an action and consequently, it is a verb whereas procurement is a noun to the contrary.
Purchase vs Procurement Comparison Table
The following is the 5 topmost comparisons between Purchase vs Procurement
|Basic Definition||Purchasing is a basic and concise term that will include giving money for goods or products. It can even be said that purchasing is a small and one of the parts of procurement.||Procurement envelopes start to finish supply chain management strategies which incorporate sourcing, negotiating contracts, and obtaining services or work from external sources, raw materials, goods, then it will follow through to ensure contracts will be satisfied as per the terms of the contract. The objective of the procurement is spending control, workflow efficiency, and cost savings.|
|Context||A concise and simple term that will include giving the money for a product or goods as discussed earlier.||A more extensive term that will include designing, sourcing, processing, negotiating and fixing the standards.|
|What it incorporates||Purchasing term generally will incorporate buying or say buying of goods or an object, i.e. paying the cash against the goods or the object.||Procurement usually will incorporate some specifications development, marketing, administration of a contract, supplier market research, negotiation, purchasing activities, value analysis, and control of the inventory, and the traffic.|
|Is it inclusive||Purchasing is a subset of the procedure of procurement.||Procurement incorporates the term buying as part of its process as explained previously.|
The impact of an e-procurement solution
There are various stakeholders involved in purchasing or procurement–from internal parties like representatives in various departments to external people like contract negotiators and vendors. Regardless of their differences mentioned in the procurement vs. purchasing table, both processes demand meticulous documentation. They both involve a complex web of strategies.
A solitary purchasing cycle may keep going for weeks, while a whole the procurement cycle can last for months or even repeated if an appropriate bid isn’t found. Whenever performed manually, both activities will have a common disadvantage of efficiency. Simply the process of revising every document, assessing every bid, and reviewing every invoice will cause an excessive amount of delay.
A complete digital procure-to-pay solution, on the other hand, permits organizations to store all purchasing and procurement related records in one centralized database.
Conclusion – Purchase vs Procurement
Since the purchase is a kind of process within the overall process of the procurement, both the purchase of the term vs procurement is normally utilized as interchangeably. In the world of the business, the act of utilizing a similar terminology in either conversation or printed materials is a routine task, despite the fact, it is frequently puzzling, and it must be avoided. Procurement will manage the negotiation and the strategic selection of services and the goods that are typical of more significant to an entity. Purchasing is the procedure of how goods and services will be ordered. Purchasing can normally be defined as the transactional function or activity of procurement for goods or services.
A procurement strategy will for the most part look to streamline those operations by defining each aspect of the supply chain management and setting the protocols for the purchase requisition, automated spend, approval process, and the most ideal delivery options.
Where a purchase will start and will end with the acquisition of services and the goods, procurement is progressing and proceeding with detailed design function or the process which makes informed purchase decisions that depend on the available data, and that ought to be kept up to date. The purchasing department will consistently look and will monitor to improve and optimize the supplier relationships, and will likewise try to discover the ways to bring down supply chain management expense and further minimize the losses of the organization.