The Difference between Procurement and Purchasing and the Primary Role of a Purchasing Department

July 23rd, 2020

The terms purchasing and procurement are used interchangeably, but.......

 

 

Today’s  post is from our archives at  SafeSourcing Inc.

The terms purchasing and procurement are used interchangeably, but despite their apparent similarities they do have different meanings. I can’t tell you how often we are asked, what do  you mean by procurement or eProcurement?

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

Purchasing, then, is a subset of procurement. Purchasing generally refers to buying products or services whos prices have already been negotiated  this may include shipping and receiving details and payment terms as well.

Because purchasing is a process within the overall procurement process, both procurement and purchasing are often used interchangeably. In the business world, the practice of using similar terminology seems to work, although it can sometimes be a little confusing and cause problems like rouge sourcing and or tail spend mismanagement.

To sum up: 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. Purchasing can usually be described as the transactional function of procurement for less vital goods or services.

Purchasing departments are responsible for procuring supplies. The development of strategic planning and the arrival of just-in-time purchasing, make purchasing a more crucial business function. Today, purchasing is often referred to as part of supply chain management and the purchasing department has taken on a larger and more vital business role. Purchasing departments often work alongside product development teams to source materials and determine cost of the finished product. Purchasing departments may use e-procurement companies, like SafeSourcing, Inc., trade publications, source suppliers, or go straight to the manufacturer. Finding the correct item at the correct price can be difficult, and purchasing departments may also work to assist suppliers in  helping to manufacture the item needed. This can involve providing considerable assistance to the supplier.

For more information on how SafeSourcing can help your Purchasing Department procure goods and services please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.

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