People do confuse themselves with the terms “procurement” and “purchasing”, as there are often used interchangeably, but actually these are referred to two different processes. There is a thin line between procurement and purchasing
Very simple and basic definition could be “purchasing starts after procurement finishes it work”.
Let’s explain it; procurement is a set process and procedures established to identify and buy goods and services (It’s not physical purchasing), while purchasing is actual purchasing the goods and services that were finalized as a result of activities of procurement department.
Procurement vs purchasing manager performs different tasks. Lets understand both the processes.
Procurement is broad term that comprise of various processes to purchase required goods and services. Instead of directly going to market and buying the required items; a procurement person considers a wide range of factors to identify the best products at best price.
In other words procurement involves making buying decisions. What is required, from where to buy, best suppliers and so on.
Some key procurement processes include:
- Market research
- Identification of potential suppliers
- Explaining company requirements and specification to the set of suppliers
- Making inquiries
- Receiving and assessing quotations
- Negotiating terms
- Selection vendors
- Contract development and management
- Supplier relationship management
Simply the procurement is to arrive at a purchasing decision. It involves all the activities since a demand or need is generating in system that an item is required.
The Purchasing Process
As procurement process completes, purchasing starts it function. It is physical acquisition of goods and services. This is often the last step in the procurement process. Supplier selection, quotations, purchase order generating and other activities are already done at this stage.
Key purchasing processes include:
- Price negotiation
- Order placement
- Order Confirmation
- Delivery schedules
- Mode of shipment
- Making payments
- Receiving goods