What’s the Difference Between Procurement and Purchasing?

Procurement is often mistaken for purchasing, and the two terms are often used interchangeably. But those two functions are actually quite distinct—in their intent, the tasks they cover, the people involved and, most notably, what they accomplish.

If you ask a layman about the difference, you may get a reply that purchasing and procurement are one and the same. But, if you ask the same question to a procurement officer of an enterprise, you’ll get a significantly longer answer as to how and why there’s a world of differences between purchasing and procurement.

It is true that a few organizations prefer to use one term over the other, but failing to learn the key differences between purchasing and procurement can make an organization overlook key components that have the potential break an organization’s bottom line.

Now, let’s dive deeper into the concept of ‘procurement vs purchasing’, and see how they differ from each other.

What is Procurement?

Procurement refers to the process of identifying, shortlisting, selecting, and acquiring suitable goods or services or works from a third party vendor through a direct purchase, competitive bidding, or tendering process while ensuring timely delivery in the right quality and quantity.

An end-to-end procurement process consists of the steps listed below:

Surveying the market

Spotting potential suppliers

Creating an approved list of vendors

Spotting internal needs

Creating a purchase order online

Requesting proposals and evaluating quotations

Selecting the right supplier and negotiating effectively

Receiving goods and performing quality checks

Developing and managing contracts

Obtaining invoice approvals and fulfilling payment terms

Establishing a good supplier relationship

What is purchasing?

Purchasing is the set of functions associated with acquiring the goods and services that an organization requires. Purchasing is a small subset of the broader procurement function. This process includes activities like ordering, expediting, receiving, and fulfilling payment.

Listed below are the steps in the purchasing process:

Obtaining a purchase requisition

Requesting proposals and evaluating quotations

Dispatching official purchase orders

Receiving products and services

Checking the quality of delivered items

Effecting payment to vendors