Procurement vs Purchasing
Procurement and Purchasing are two actions that are performed in relation to goods and services and they are done with differences in their method and approach.
Procurement may be defined as the acquisition of appropriate goods or services at the best possible total cost of ownership. This is done to meet the needs of the purchaser. The factors or quality and quantity are taken into account in the act of procurement.
On the other hand purchasing is a form of buying that consists in getting the goods or services by paying a certain amount of price or money. The amount of money or price paid in the case of purchasing will be in accordance with the quality and quantity of the goods or services. This is the main difference between procurement and purchasing.
It is thus understood from the definition given above that both procurement and purchasing have the factors of quality and quantity common between them. It is important to note that procurement is done to meet the needs of the purchaser in terms of time and location as well. This is an important observation to be made in defining procurement.
There are two types of procurement called the direct procurement and the indirect procurement. Direct procurement involves the acquisition of raw materials and production goods. Indirect procurement involves the acquisition of maintenance, repair and operating supplies.
An example of direct procurement is crude oil in petroleum industry. Similarly an example of indirect procurement is lubricants. Acquisition of spare parts can also be cited as an example under indirect procurement.
Purchasing is normally done by both individuals and groups such as companies and organizations. On the other hand procurement is done mainly by companies and organizations or such other groups.
It is important to know that procurement is a process in business organization and is said to contain seven steps. These steps include information gathering, supplier contact, background review, negotiation, fulfillment, consumption, maintenance and disposal and renewal.
Purchasing can also be divided mainly into two called direct purchasing and indirect purchasing. Direct purchasing involves the method of paying cash or money directly and getting the goods or the services delivered to your house. Indirect purchasing involves buying of goods or services through the third party sources. It is interesting to note that timing of purchases plays a very important role in the procurement systems.
Purchasing is just one of the components of procurement. It relates only to the process of exchanging financial resources for the necessary goods and services. As such, it should be the final step in the procurement process.
Once all the necessary steps have been taken, purchasing should be the result of the entire decision-making process. Since all complex matters have already been dealt with, purchasing is a straightforward task that closes the procurement process.