Procurement & Purchasing – Know The Basics

In this Procurement & Purchasing – Know The Basics blog post , I talk about the difference between Procurement vs Purchasing ! 3 Essentials differences of what they include between the two and their 6 and 10 steps.

Although it maybe understood by many in the industry of procurement and supply chain.

However as it comes to some of our ambassadors’ attention while they are browsing their LinkedIn personal feed, they noticed that procurement and purchasing are used interchangeably and too often, in addition to that procurement professionals are posting about these basics, still.

The 3 Basic Differences

Procurement & purchasing
From Social Procurement LinkedIn Page

Procurement, indeed, is the process of finding, acquiring, and buying goods, services, or works from an external source, like third party or vendor. It involves activities such as sourcing, negotiation, purchasing, and contract management and we will talk about this later in this series of Procurement & Purchasing – Know The Basics blog post….

Yet, the counterpart of procurement is purchasing as per Wikipedia definition, “Purchasing is the procurement process a business or organization uses to acquire goods or services to accomplish its goals. Although there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly between organizations.”

Therefore you see! procurement & purchasing can be confusing to many. I differentiate in details about them and what are their key tasks and they involve as a process.

Purchasing Processes Include..

  • Expenditure requests and purchase approvals.
  • Creation of a purchasing order then,
  • Receiving and check goods and service compliance and specs.
  • Attaching a packing slip to a purchase and finally
  • Passing the completed purchase to the accounts payable team.

And till now, some basic differences in processes between Procurement & Purchasing I covered by far.

Whereas Procurement Involves In…

  • Sourcing activities and tactical sourcing.
  • Negotiation and vendors management.
  • Selecting goods and services.
  • Approving prganizational buying requests then
  • Receiving goods and services.

It is getting clearer and clearer, Isn’t it? and consequently let us more to Procurement & Purchasing – Know The Basics and their objectives and 5 key differences and questions to answers between purchasing and procurement.

From Questions To Answer

The main 5 questions that differentiate between purchasing & procurement are

  • What are the end goals of each one?
  • How goods and services are assessed against the compliance and specs required?
  • Where they are beneficial?
  • What tasks do they have and afterwards
  • How they deal with suppliers?

In Procurement – Its end goal is to identify organizational needs and fulfill them. Procurement places more importance on quality and assess on items’ values rather than prices. Procurement is involved in the end-to-end activities needed to get all required goods or services. It includes tasks related to recognition to sourcing, contracts, closure and record keeping of transaction.

And finally, They way it deals with suppliers is focus on developing longterm win-win supplier-relations.

Regarding Purchasing – Its end goal is to arrange organizational expenditures and just buy goods or purchase services for the company or departments. On the contrary to procurement, purchasing relies on prices more than the value given from these goods. it is only get involved when the time buying transaction has to be made and done. Purchasing includes tasks like offerings, expedition and payments. Purchasing function cares more about the efficiency of a transaction more than nurturing a relation with suppliers.

Procurement & Purchasing Steps

The 10 Procurement steps:

  1. Identify the organizational needs of goods and serives.
  2. Submit purchase request
  3. Assess and select vendors
  4. Negotiate prices and terms according to the contracts
  5. Create a purchase order
  6. Wait for the order to arrive
  7. Receive and inspect the order.
  8. Conduct three-way watching – is comparing purchase order with the goods received and suppliers’ invoices
  9. Approve the invoice and arrangement payments methods and terms
  10. Finally conduct record keeping

Following the 6 processes or steps of Purchasing:

  1. Acknowledge purchase order
  2. Send an advance of shipping note
  3. Collect and file the goods or service receipts
  4. Conduct invoices recording
  5. Also perform the three-way match process
  6. and afterwards just pay the vender

Furthermore, do yo have a way to differentiate between the purchasing & procurement in your department or organization? Let us know and connect with the initiator of #SocialProcurement on LinkedIn – Mario Burggmann – Supply Chain Innovator or check his previous webinars talking about it.

Lastly you can download #SocialProcurement Educational Series PDF about procurement and purchasing HERE!

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