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.
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).
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.
To explain further, here are five key differences between procurement and purchasing:
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.
Current SCM is the first of its kind - supply chain management software purpose-built to support the most complex procurement & materials management projects. With Materials Management and Vendor Document Requirements uniquely integrated into the Order, Current SCM provides a unified, collaborative platform to streamline the end-to-end process of project-driven procurement & materials management.
If you engage in any of Direct Procurement, Technical Procurement, Project Procurement or Third Party Procurement, Current SCM will improve 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!