Difference Between Purchase and Procurement

Purchase vs Procurement

If you ask a layman the difference between purchase and procurement, he may laugh saying the two are same and even question your level of knowledge. But repeat the same question to someone who is a manager in the purchase section of a large organization and he may come up with a lengthy answer. Yes, there are companies who still use the term purchase over procurement but there are striking differences in the two terms that will be explained in this article.

There are many who believe that purchase is that part of procurement that deals with the actual transaction of goods or services. There are other parts of the whole procurement process that include sourcing, bargaining, and logistics etc. Purchasing in earlier times was a routine job performed at the clerical level. Those were the times when there were limited suppliers and also limited quality of materials available. Prices used to be fixed and no bargaining was possible.

Times have changed today. Inventory management has become a specialized job that requires more than just placing orders with a vendor. Procurement today requires buying goods and services at the best possible rates at the right time, in right quantity, at the best possible quality, from the best available source so that the process results in maximum benefit for the organization. When it boils down to repeat purchasing through the same channel in the same manner, it can be called purchasing as no more brains are involved.

There are people who use the terms, procurement and purchase interchangeably, but with so much at stake, it is not justifiable to equate procurement with the simple act of purchasing. While purchase is more of an administrative function in a company, procurement has come to the level of strategic function as a lot hinges upon successful completion of the entire process called procurement.

In brief:

Purchase vs Procurement

• In corporate world, the word procurement has come to be referred to the set of activities that need to be performed to acquire the right material from the right vendor at the best possible rates at just the right time to maximize benefits for the company. On the other hand, purchase is just the transactional part of the entire process called procurement.

• Purchase is the most basic form of procurement

• Procurement involves much more than simple acquisition of goods and services as negotiation as well as logistics is also encompassed in this term.