Supply Chain || Procurement Vs Purchasing

 

𝐏𝐫𝐨𝐜𝐮𝐫𝐞𝐦𝐞𝐧𝐭 𝐢𝐬 𝐨𝐟𝐭𝐞𝐧 𝐦𝐢𝐬𝐭𝐚𝐤𝐞𝐧 𝐟𝐨𝐫 𝐩𝐮𝐫𝐜𝐡𝐚𝐬𝐢𝐧𝐠, 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐭𝐰𝐨 𝐭𝐞𝐫𝐦𝐬 𝐚𝐫𝐞 𝐨𝐟𝐭𝐞𝐧 𝐮𝐬𝐞𝐝 𝐢𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞𝐚𝐛𝐥𝐲. But those two functions are actually quite distinct—in their intent, the tasks they cover, the people involved, and, most notably, what they accomplish.

Procurement is the process of identifying, shortlisting, selecting, and acquiring suitable goods or services or works from a third-party vendor through a direct purchase, competitive bidding, or tendering process while ensuring timely delivery of the right quality and quantity.

An end-to-end procurement process consists of the steps listed below:
✱ Surveying the market
✱ Spotting potential suppliers
✱ Creating an approved list of vendors
✱ Spotting internal needs
✱ Creating a purchase order online
✱ Requesting proposals and evaluating quotations
✱ Selecting the right supplier and negotiating effectively
✱ Receiving goods and performing quality checks
✱ Developing and managing contracts
✱ Obtaining invoice approvals and fulfilling payment terms
✱ Establishing a good supplier relationship

Purchasing is the set of functions associated with acquiring the goods and services that an organization requires. Purchasing is a small subset of the broader procurement function. This process includes activities like ordering, expediting, receiving, and fulfilling payment.

Listed below are the steps in the purchasing process:
✱ Obtaining 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 includes another major difference. Purchasing focuses on short-term goals such as fulfilling the five rights in a transaction (right quality, right quantity, right cost, right time, and right place), whereas procurement management focuses on strategic, long-term goals like gaining a competitive advantage or aligning itself with corporate strategy or goals.