What is the Difference Between Procurement and Purchasing?
🆚 Go to Comparative Table 🆚Procurement and purchasing are related but distinct processes in the acquisition of goods and services for a business. The main differences between them include:
- Scope: Procurement is a more strategic and comprehensive process that involves identifying company needs, selecting suppliers, establishing payment terms, and managing supplier relationships. Purchasing, on the other hand, is more transactional and focuses on the actual process of ordering, receiving, and paying for goods and services.
- Objective: Procurement aims to create long-term value for the organization and manage risks throughout the supply chain. Purchasing focuses on short-term goals like fulfilling the five rights in a transaction (right quality, right quantity, right cost, right time, and right place).
- Activities: Procurement activities include sourcing vendors, negotiating contracts, and evaluating quotes. Purchasing activities involve tasks like raising purchase orders, receiving goods, and arranging payment.
- Focus: Procurement is a holistic approach that considers the overall value creation and total costs throughout the purchasing process. Purchasing is more focused on the best price for goods and services rather than the best overall value.
In summary, both procurement and purchasing are essential functions in the acquisition process, but they differ in their scope, objectives, activities, and focus. Procurement is a more strategic and comprehensive process, while purchasing is more transactional and focused on short-term goals.
Comparative Table: Procurement vs Purchasing
The difference between procurement and purchasing can be summarized in the following table:
| Aspect | Procurement | Purchasing |
|---|---|---|
| Focus | Strategic process of product sourcing, supplier selection, and negotiation | Transactional function of ordering and acquiring goods and services |
| Goals | Long-term strategic goals, corporate strategy, risk mitigation, and cost reduction | Short-term goals of making efficient transactions and ensuring timely delivery of goods and services |
| Activities | Identifies needs and requirements, sources and evaluates suppliers, negotiates terms and conditions, and builds and manages supplier relationships | Orders goods and services, receives and checks the quality of delivered items, and effects payment to vendors |
| Process | Includes supplier selection, negotiation, and contracting | Part of the procurement process, but focuses on the transactional phase associated with buying products and services |
In summary, procurement is a strategic process that deals with the sourcing of activities, negotiation, and strategic selection of goods and services, while purchasing is a more transactional process focused on the actual acquisition of goods and services.
- Purchase vs Procurement
- Acquisition vs Procurement
- Sourcing vs Procurement
- Contract vs Purchase Order
- Purchase vs Buy
- Acquire vs Procure
- Invoice vs Purchase Order
- Public vs Private Procurement
- Proactive vs Reactive Purchasing
- Vendor vs Supplier
- Purchase vs Acquisition (Method of Accounting)
- Point of Sale vs Point of Purchase
- Brought vs Bought
- Merger vs Acquisition
- Sales Ledger vs Purchase Ledger
- Supplier vs Distributor
- Supply vs Demand
- Price vs Cost
- Sale vs Hire Purchase