How Is Procurement Different From Purchasing?
From sourcing raw materials to negotiating with suppliers, procurement and purchasing are two critical functions that keep any business running. However, many people use these terms interchangeably without realizing their distinct differences. In today’s blog post, we’ll dive into the nuances of procurement vs. purchasing and explore how each plays a unique role in driving business success. Whether you’re a seasoned supply chain professional or just starting your career in procurement, this article is for you – so sit back, relax and let’s get started!
The Purpose of Procurement
The procurement process is different from purchasing in a few key ways. One big distinction is procurement is used to buy goods and services, whereas purchasing is used to acquire assets like property or equipment. Additionally, procurement typically involves negotiating contracts with suppliers, whereas purchasing typically does not. Procurement also has a longer lead time than purchasing, as it can take months or even years to get the best possible deal on a product or service.
Components of a Good Procurement Process
A good procurement process should have a clear and concise acquisition strategy, well-defined requirements, reliable source selection processes, effective contract management processes, and a proper evaluation of contractor performance.
The acquisition strategy should be based on the company’s overall business objectives and vision. The requirements should be specific to the project and its objectives. The source selection process should select qualified suppliers who can meet the required specifications. The contract management process should ensure that all contracts are properly monitored and managed to meet specified milestones. The evaluation of contractor performance should assess whether the contractor met expectations and whether any changes need to be made in future procurements.
Types of Purchasing
Procurement is the process by which goods and services are acquired. purchasing is the act of acquiring goods and services for personal, commercial, or governmental use. Procurement can be broken down into four main types:
1. Open Purchase – An open purchase is a purchase where the buyer and seller are not bound by any contractual terms. This type of purchase is typically used when the buyer needs to evaluate the product or service before committing to a purchase.
2. Negotiated Purchase – A negotiated purchase is a purchase where the buyer and seller work together to negotiate a specific price and terms of sale. This type of purchase is typically used when the buyer wants to avoid potential haggling over price.
3. Forced Purchase – A forced purchase is a purchase where the buyer cannot refuse or cancel the order without consequences. This type of purchase is typically used when the seller has limited availability or stock of an item that the buyer needs.
4. Quota Purchase – A quota purchase is a buy where a certain quantity or percentage of an item must be purchased before shipment will occur. This type of buy is typically used when inventory levels are low and it’s important to ensure that all required items are available at once.
The Roles of Purchasing Organizations
Purchasing organizations play an important role in the procurement process. Purchasing organizations are responsible for buying goods and services on behalf of their organization. They work with suppliers to find the best products and prices.
Purchasing organizations usually have different roles in the procurement process. The lead buyer is usually responsible for negotiating contracts and organizing purchases. The coordinator works with other purchasing departments to coordinate purchase requests. The manager oversees the overall purchasing process and makes sure it runs smoothly.
Purchasing organizations can be found in government, business, and educational institutions. They can also be private companies or nonprofit organizations.
Conclusion
Procurement is a process that consists of the identification and selection of suppliers. It differs from purchasing in that procurement processes are geared towards finding qualified suppliers while purchasing focuses on meeting the needs of the customer. Because procurement can be time-consuming, it is important to use a qualified vendor who can help you identify potential suppliers and navigate through the procurement process.