Not unlike the confusion between procurement and sourcing, there is sometimes confusion when it comes to procurement and purchasing. Some even use the terms procurement and purchasing interchangeably, but the terms have different and distinct meanings. Let’s explore the difference between procurement and purchasing.
Procurement vs Purchasing: What is Procurement?
A Strategic Perspective
Procurement encompasses the entire end-to-end process of acquiring the goods and services required by an organization. Procurement is a holistic and strategic approach, involving a series of interconnected steps that occur before, during, and after the purchase, including planning needs, sourcing suppliers, negotiating long-term contracts, and managing supplier relationships. Procurement is typically proactive in nature, focused on the long-term needs of an organization.
Efficient procurement aims to optimize cost, quality, and delivery to meet organizational goals. It plays a crucial role in supply chain management, ensuring businesses obtain the necessary resources to operate effectively while considering factors like sustainability, risk management, regulatory compliance, and total cost of ownership (TCO).
Procurement vs Purchasing: What is Purchasing?
The Tactical Transaction
Purchasing, on the other hand, is a specific and tactical aspect of the overall procurement process. Purchasing specifically refers to the transactional act of acquiring goods or services. Purchasing involves tasks such as selecting suppliers, negotiating price, and completing transactions to meet the organization’s needs. Purchasing is typically reactive in nature, focused on fulfilling the imminent short-term needs of an organization.
Effective purchasing contributes to cost control, timely access to resources, and overall operational success within a business.
Procurement vs Purchasing: 5 Key Differences
To explain further, here are five key differences between procurement and purchasing:
1. Scope
- Procurement: Encompasses the holistic approach to acquiring goods and services, including activities beyond the purchase itself such as planning, strategic sourcing, and supplier relationship management.
- Purchasing: Is a transactional activity within the procurement process focused specifically on the act of acquiring goods or services.
2. Focus
- Procurement: Focuses on ensuring supply and optimizing quality, costs, and supplier performance in alignment with organizational goals.
- Purchasing: Focuses on obtaining the required items in a timely and cost-effective manner.
3. Approach
- Procurement: Often has a long-term and strategic approach, proactively planning for future needs, developing mutually beneficial relationships with suppliers, and identifying opportunities for cost savings and efficiency improvements.
- Purchasing: Tends to be short-term and transaction-oriented, reacting to the current needs of the organization.
4. Supplier Relationships
- Procurement: Emphasizes building and managing strong supplier relationships. Collaboration, risk-sharing, and innovation are key components.
- Purchasing: Primarily focuses on the transaction itself – negotiating terms, obtaining the best price, and completing the purchase. While relationships matter, the primary goal is often the efficient acquisition of goods or services.
5. Measuring the Cost
- Procurement: Considers the overall value to the organization, including total cost of ownership (TCO), ESG goals, and risk mitigation.
- Purchasing: Typically focused on the best purchase price.
In Summary
Procurement and purchasing are related but distinct concepts. Procurement is the strategic and holistic process of acquiring goods and services, while purchasing is the tactical and specific transactional act of acquiring goods or services. By understanding the various terms and nuances within the complex landscape of supply chain management, organizations can prepare themselves strategically for optimal efficiency and to fortify their resilience.
Engaged in Complex Procurement?
Current SCM is a cloud-based software that streamlines the process of project-based procurement & materials management and drives collaboration among project stakeholders. The term “project” can be defined as a construction project or a manufacturing project, or it can simply represent the way a business organizes their procurement (e.g., by project, program, product, client, division, business unit, region).
Current SCM offers a unique platform to manage the end-to-end process of project-driven supply chain management, including support for the planning, procurement, and management of both materials and services. Current SCM includes a robust set of project-based toolsets, including Project Planning, Material Planning, Service Planning, Vendor Document Requirements Management, Requisition Management, Bid Management, Purchase Order Management, Service Order Management, Material & Document Tracking, Inspection Management, Vendor Invoice Matching, Project Inventory Management, Project Asset Management, and more!
And Current SCM excels in accommodating diverse project requirements with unrivaled flexibility & control, including project-specific User access & permissions, cost structures, business rules, approved vendors, workflows, terms, reports, and much, much more!
If you engage in any of Project Procurement, Technical Procurement, Direct Procurement, or Third Party Procurement, Current SCM will optimize your procurement & materials management workflow. If you engage in all four, Current SCM will revolutionize the way you do business.
Contact the team at Current SCM today to learn more!
