While it’s important to understand the differences between procurement and purchasing, there’s a reason the two terms are often used interchangeably: they are closely related and can have overlapping responsibilities depending on your business model. The key difference between the two lies in where you find or locate your goods or services and how you pay for them.
What You Need to Know About Procurement Vs Purchasing in Your Business:
Both Are Important:
Both procurement and purchasing are essential aspects of any business, but they have different purposes. Procurement is about finding the best-priced goods or services for your company, whereas purchasing is a more hands-on process that requires you to sign off on every purchase order before it goes through. There are many ways in which procurement and purchasing overlap. For example, you may need to find both suppliers and providers if you want to be sure that your procurement is leading to successful purchases.
The Processes Are Different:
The process of procurement and purchasing are different in many ways, but they are often confused with each other. Procurement is when a company finds a supplier to fulfil their goods or services needs while purchasing is when someone buys something from a store or online retailer. Purchases tend to be more specific while procurement includes a much wider range of products and services that can be offered by suppliers.
A person who purchases may do so without any input from others in the organization, but an individual who procures will typically consult those within the company before making a purchase decision. If you want to purchase something on your own, it’s usually as simple as walking into a store or buying it online through an e-commerce site. But if you’re interested in procuring something for your business, you’ll need to contact suppliers and work out deals with them before completing your purchase order.
Also Read: 10 TIPS FOR CREATING A SEAMLESS PROCUREMENT PROCESS
Positives For Each Type of Buyer:
Purchasers are usually responsible for buying products and services for companies that they work for, which is why this type of buyer typically has a high position within the company (i.e., director, vice president, etc.). In contrast, procurement professionals often buy goods on behalf of their organization by bidding with suppliers to get the best price possible; however, there are also buyers in this field who would purchase supplies that a company may need from stores such as Wal-Mart or Target. Some firms hire both purchasers and procurement managers. For example, if someone was hired to do purchasing at a factory then he or she may also be called upon to do some level of purchasing for small items needed around the office–such as office supplies.
Negatives For Each Type of Buyer:
- Procurement is about ensuring that you have the resources for your company to grow and be successful. Purchasing is about what you need to do each day to make sure that your company has everything it needs at any given time.
- Procurements are more strategic, whereas purchases are more tactical.
- Procurement deals with future-oriented things like how to expand a supply chain or upgrade equipment so that your business can operate smoothly. Purchases on the other hand deal with daily things like how much paper stock you should keep on hand.
- A purchase may also involve ordering new products from suppliers or negotiating a contract with them while a procurement will look into whether there are cheaper vendors available elsewhere.
What Does This Mean for Your Company?
Procurement professionals are typically responsible for finding and negotiating to buy products or services from a supplier or manufacturers, whereas purchasing professionals are responsible for buying supplies, equipment, and other necessary materials for organizations. A purchase may also be called a supply purchase. There may be some overlap in duties depending on how large the company is and how it structures its business processes.
For example, a purchasing professional could be tasked with sourcing raw materials if that responsibility falls within their job description. However, they would not typically source finished goods as this role falls under procurement. In most cases, procurement will handle orders of finished goods such as shoes, shirts, or electronics. You might have one person dedicated to each area (procurement for bulk orders and purchases for specific items) or a person who handles both roles which is more common in smaller companies.
In conclusion, procurement and purchasing are two separate functions in a company, though they both deal with how to acquire goods and services for the company. Procurement is the process of planning, negotiating, coordinating, and executing an agreement to purchase goods or services while purchasing is the act of buying these items on behalf of your company. Purchasing involves managing suppliers as well as distribution channels while procuring involves budgeting and buying things outside of your organization such as from a vendor or supplier.