Purchasing vs Procurement

Purchasing is just a part of procurement as it only involves acquiring goods and services by placing orders to the selected supplier, then receiving goods from them, and finally paying off the supply price of goods to the suppliers. In contrast, procurement has a wider scope, including market surveys, identifying potential suppliers, selecting suppliers, negotiating prices, performing quality checks, establishing good relationships with suppliers, etc.

Procurement has a broader scope compared with Purchasing. Procurement is the entire process involved in acquiring goods and services. It meets the internal needs efficiently through purchasing or hiring, and outsourcing.

The main objective of purchasing involves maintaining the quality and value of a company's products. Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts, and actual purchasing of goods. In contrast, purchasing does not require strategic vetting and negotiating contracts.

Purchasing is the act of buying good services for the company. Purchasing relates to everything a company buys, like raw materials, components, investment goods, IT, facility services, legal, and account services.

There are two types of purchasing;

• Direct Purchasing: The items that are part of finished goods. Direct Purchase affects the production process of manufacturing. Ex. Raw Materials
• Indirect Purchasing: Indirect Purchasing activities are associated with operating resources that an organization purchases to enable its operations. Ex. Maintenance Spare, Market-related services (Advertising). Modern businesses streamline these processes by implementing comprehensive purchase order software that automates requisitions, approvals, and vendor communications across both direct and indirect purchasing categories.

Procurement is the act of acquiring goods and services. It is the activity associated with establishing the nature of the commercial relationship between the sellers and the buyers.

Procurement adds value by matching an organization's need to what the supply market can provide and vice versa by developing the supply market to meet the need of the company. It is about influencing, negotiating and building relationships with key stakeholders and suppliers; people involved in procurement require the strategic function and value contributor by analyzing the below function in procurement.

• Quality
• Quantity
• Price
• Place
• Time Risk

Here are the top differences between purchasing vs. procurement.

Both processes are an integral part of running the business, and the process of procurement is often part of a company strategy because the ability to purchase certain materials will determine if the operator will continue. A business procurement will not be able to survive if its price is more than the profit it makes on selling the actual product, and purchasing costs may directly impact profit. Nowadays, the internet and e-commerce Are drastically changing how purchasing is done.

This has been a guide to Purchasing vs Procurement. Here we discuss their top differences, infographics, and a comparison table. You may also have a look at the following articles –

• Price vs Cost
• Hard Cost vs Soft Cost Differences
• Marginal Cost Formula
• Differences Between Assets Purchase and Stock Purchase
• Strategic Budgeting