operations

Procurement vs. Purchasing: What’s the Difference?

Procurement vs. Purchasing: What’s the Difference?

The best way to understand the difference between procurement and purchasing in a business is to consider the process involved in buying a car, says Logistics Bureau’s procurement specialist, Trent Morris. Procurement First, Purchasing Follows Procurement: If you’re going to buy a new car, you usually decide what you want before you step out into the street. You consider, for example, the number of seats you want in the vehicle and whether you want a 4-wheel drive, a sedan, or an SUV. Then you start looking at all the manufacturers and what they have to offer. Once you have done that, you move into getting prices on the vehicles. The first part, where you are doing research into the industry, that’s procurement. It’s understanding how much you want to spend, the type of car you want, and how many seats you need. It’s looking at what’s available on the market, the different suppliers, what their products are like, whether it matches your needs—it is not actually buying the product. Purchasing: Once you know what you want, you go out and find what you want for the right price. But it’s not only the price. Sometimes it’s the service capability of the dealership. It could be the after-purchase service or the warranties that you are after. But all of those things become purchasing as opposed to procurement. Note: Sometimes in smaller businesses, procurement and purchasing might be the same thing. The Link between Procurement and Purchasing I would suggest that purchasing is a subset of procurement, in as much as procurement serves to guide the purchasing process. A purchasing manager or purchasing officer typically won’t buy anything unless the contract has been set up by procurement, so in that way procurement and purchasing are linked. Sometimes they are decentralised—an operations team may look after purchasing if they’re talking about widgets or something like that, but if you are talking about something more indirect, like travel, that may be governed by a centralised body. In a small business, usually, it’s going to be a senior person or a director saying, we’re going to buy our widgets from this supplier, and negotiate the supply and prices and so on, and then an admin person or someone in purchasing actually does the buying. Procurement typically has the authority on behalf of the business to engage with suppliers to make deals. The person who...

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