Purchasing vs Procurement

Difference Between Purchasing vs Procurement

Procurement vs Purchasing – Procurement has a broader scope compared with Purchasing.

Procurement is the entire process involved in acquiring goods and services. Procurement meets the internal need efficiently through purchasing or hiring and outsourcing. Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts and actual purchasing of goods whereas purchasing do not require strategic vetting and negotiating the contracts. The main objective of purchasing involves maintaining the quality and value of a company’s products.

In this article, we look at the Procurement vs Purchasing in detail.

What is Purchasing?

Purchasing is the act of buying good, services for 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 is associated with Operating resources that an Organization purchase to enable its operations. Ex. Maintenance Spare, Market-related services (Advertising)

What is Procurement?

Procurement is the art of acquiring good and services. Procurement is the activities associated with establishing the nature of the commercial relationship between the sellers and the buyers.

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

• Quality
• Quantity
• Price
• Place
• Time Risk

Purchasing vs Procurement Infographics

Here we provide you with the top 6 difference between Purchasing vs Procurement

Purchasing vs Procurement Head to Head Difference

Let’s now look at the head to head difference between Purchasing vs Procurement

Procurement		Purchasing
Procurement is matched the organization need by making strategic sourcing		Purchasing relates to buying goods and services with little strategy.
Procurement need a lot of strategy before finalizing the procurement deal		The objective of purchasing is to buy materials with the exact need. Best quality and deliver the material to the destination within a specific period of time.
Procurement is more than just managing to spend through a structured process.		Purchasing is a normal transaction when a company pays for goods and services.
It involves selecting Vendors, Inspection of Quality of Goods and evaluating the potential suppliers.		Purchasing department would like to work with vendors that are previously working with the organization.
It requires a set of skill set like Conflict Resolution, Research, Effective communicator, Influences to maintain good supplier relationship and business outcome.		It requires a set of skills like analytic thinking, inventory management, and time management to maintain so that production of the company is not affected.
The  Procurement role is high strategic purpose and value contributor and they build a relationship with company stakeholders.		Purchasing role is less concern about the risk associated with the buying of goods and services.

Conclusion

Purchase and Procurement are an integral part to run 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 procurement is more than the profit it makes on selling the actual product and purchasing cost may have a direct impact on profit. Nowadays the internet and e-commerce Are drastically changing the way of purchasing is done.

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