What is the difference between " Procurement '' and ''Purchasing''?

Many people use the terms purchasing and procurement interchangeably, but despite their similarities they do have different meanings. Let’s clarify any confusion on the difference between procurement and purchasing.

Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts and actual purchasing of goods. Procurement is concerned with acquiring (procuring) all of the goods, services and work that is vital to an organization. Procurement is, essentially, the overarching or umbrella term within which purchasing can be found.

The importance of strategy

Because procurement is an umbrella term that includes several core business functions it should be considered a core part of any organization’s corporate strategy.

Our friends at entrepreneurial-insights.com have published a great explanation of 4 aspects of corporate strategy. Those aspects are: Company Identity, Market Placement, Company Capabilities and Management Issues.

The purchasing process

Purchasing is a subset of procurement. Purchasing generally refers simply to buying goods or services. Purchasing often includes receiving and payment as well.

Within the overarching Procure-To-Pay Cycle, the steps specifically related to purchasing are:

• Purchase Order Acknowledgement
• Advance Shipment Notice
• Goods Receipt
• Invoice Recording
• 3 Way Match
• Payment to Supplier

Unlike the entire Procure-To-Pay Cycle, the steps explicitly related to purchasing should not be tailored to suit the size and scope of each individual business. These are fundamental steps of good purchasing and should be employed routinely as a best practice in all businesses.

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Procurement deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of importance to an organization. Purchasing is the process of how goods and services are ordered

Many people use the terms purchasing and procurement interchangeably, but despite their similarities they do have different meanings. Let’s clarify any confusion on the difference between procurement and purchasing.

Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts and actual purchasing of goods. Procurement is concerned with acquiring (procuring) all of the goods, services and work that is vital to an organization. Procurement is, essentially, the overarching or umbrella term within which purchasing can be found.

Because purchasing is a process within the overarching procurement process, both procurement and purchasing are often used interchangeably. In the business world, the practice of using similar terminology in either conversation or printed materials is routine, although it is often confusing and should be avoided.

Procurement deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of importance to an organization. Purchasing is the process of how goods and services are ordered. Purchasing can usually be described as the transactional function of procurement for goods or services.

Purchasing is a part of procurement. Purchasing is simple to purchase something( from market directly) however procurement used broadly including suppliers selection, sourcing, and all other activities until awad.

1. 1. What Is The Difference Between Procurement And Purchasing
2. 2. People often use the terms purchasing & procurement interchangeably
3. 3. But even though they sound similar, they’re definitely different
4. 4. Procurement Involves Selecting Vendors Establishing Payment Terms Strategic Vetting Selection & Negotiation of Contracts
5. 5. Procurement is concerned with acquiring (procuring) all of the goods, services and work that is vital to an organization.
6. 6. Purchasing is a part of procurement
7. 7. Procurement is considered a core part of any organization’s corporate strategy
8. 8. As a quick refresher, our friends at entrepreneurial-insights.com have published a particularly lucid explanation of the facets of corporate strategy.
9. 9. Facets of corporate strategy Corporate Strategy Company Identity Market Placement Company Capabilities Management Issues
10. 10. Company identity attempts to address these questions: • What does our company want to do? • What does our company stand for? • Does our company have any specific ethical beliefs that will determine our business model?
11. 11. Market placement attempts to address these questions: • Who are our customers? • What do they want? • What do they believe in?
12. 12. Company capabilities attempts to address these questions: • What are the strengths and weaknesses of our company? • Do our strengths support the long-term goals of the company? • How do we want to grow the company?
13. 13. Management issues attempts to address these questions: • Do we need to hire / develop talent to lead the business to the goal we’ve established? • Does the company have the resources (equipment, real estate etc.) needed to support the long-term goals of the company?
14. 14. This is a great breakdown of corporate strategy because procurement touches each of these components
15. 15. If your business is building (or has built) its identity around an environmentally conscious ethic, than your procurement strategy must reflect that decision
16. 16. Customers are, without a doubt, attracted to the philosophies and practices a business uses.
17. 17. Steps in the procurement process • Identification of Requirement • Authorization of Purchase Request • Final Approval of Purchase Request • Procurement • Identification of Suppliers • Inquiries • Receipt of the Quotation • Negotiation • Selection of the Vendor • Purchase Order Acknowledgement • Advance Shipment Notice • Goods Receipt • Invoice Recording • 3 Way Match • Payment to Supplier
18. 18. Using purchase orders (especially those generated by an e- procurement software solution) is critical, regardless of the size of your organization. Don’t simply use your credits cards and save the receipts. Don’t rely on emails.
19. 19. The purchasing process • Purchase Order Acknowledgement • Advance Shipment Notice • Goods Receipt • Invoice Recording • 3 Way Match • Payment to Supplier
20. 20. Purchasing, then, is a subset of procurement. And as we’ve outlined, purchasing generally refers to buying goods or services. Purchasing often includes receiving items and payment as well.
21. 21. Unlike the entire procure-to-pay cycle, the steps explicitly related to purchasing should not be tailored to suit the size and scope of each individual business.
22. 22. Remember! Purchasing is a process within the overarching procurement process.
23. 23. Conclusion: Procurement deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of importance to an organization. Purchasing, however, is the process of how goods and services are ordered. It is usually described as the transactional explicit function of procurement for goods or services.

Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts and actual purchasing of goods. Procurement is concerned with acquiring (procuring) all of the goods, services and work that is vital to an organization

Procurement:  The strategic way of sourcing something which follows sequential process ,

Purchasing: simply ordering goods and services without following the process. let it be for the use of business or for the individual.