Procurement vs Purchasing | Difference between Procurement and purchasing
Summary
TLDRThis video discusses the difference between procurement and purchasing, terms often used interchangeably. Procurement is a strategic, proactive process involving identifying, selecting, and acquiring goods or services to meet a company’s needs. It emphasizes value and long-term relationships with suppliers. In contrast, purchasing is a reactive subset of procurement focused on efficient transactions, including ordering, expediting, and payment, with an emphasis on cost over value. The video highlights how procurement is broader, covering the entire supply chain process, while purchasing is limited to executing specific orders.
Takeaways
- 🔍 Procurement involves identifying, shortlisting, selecting, and acquiring goods or services from a third-party vendor.
- 🛒 Purchasing refers to the functions associated with acquiring the goods and services that an organization requires.
- 📊 Procurement is a broader, strategic, and proactive process, while purchasing is a smaller subset and more reactive.
- 💼 The goal of procurement is to fulfill the company's needs by acquiring necessary goods and services.
- 💸 Purchasing focuses on company expenditures, arranging for the purchase of goods and services.
- 🎯 Procurement prioritizes the value of goods and services, while purchasing is more focused on price.
- 📝 Procurement covers end-to-end activities, including need recognition, sourcing, contract closure, and record-keeping.
- 📦 Purchasing tasks mainly involve ordering, expediting, and payment processing.
- 🤝 Procurement aims to build long-term, win-win relationships with suppliers.
- 💻 Purchasing focuses on efficient transactions and does not prioritize vendor relationship development.
Q & A
What is procurement?
-Procurement refers to the process of identifying, shortlisting, selecting, and acquiring suitable goods or services from a third-party vendor, often through direct purchase, competitive bidding, or a tendering process. It also ensures timely delivery of the right quality and quantity of goods or services.
How is purchasing different from procurement?
-Purchasing is a small subset of the broader procurement process. While procurement involves identifying the company's needs and ensuring timely acquisition, purchasing focuses on acquiring goods or services and is more concerned with price than value. Purchasing is a reactive process, whereas procurement is strategic and proactive.
What are the key activities involved in procurement?
-Procurement involves a range of activities, including need recognition, sourcing, contract closure, and record-keeping. It is an end-to-end process ensuring all necessary goods and services are acquired efficiently.
What is the main focus of purchasing?
-The main focus of purchasing is to acquire the goods and services required by the organization, primarily focusing on price and making efficient transactions rather than developing long-term relationships with vendors.
How does procurement add value beyond purchasing?
-Procurement adds value by focusing on the overall value of goods or services rather than just their price. It also involves strategic planning, vendor relationship management, and ensuring that acquisitions meet the company’s needs long-term.
What are the key tasks involved in purchasing?
-The key tasks involved in purchasing include ordering goods or services, expediting the delivery process, receiving the goods or services, and handling payment.
What is the end goal of procurement?
-The end goal of procurement is to identify and fulfill the needs of the company in a way that is both strategic and proactive, ensuring value and long-term success.
What is the end goal of purchasing?
-The end goal of purchasing is to arrange company expenditures and acquire the goods and services needed for the organization in a way that is efficient and cost-effective.
How do procurement and purchasing differ in terms of supplier relationships?
-Procurement focuses on building long-term, win-win relationships with suppliers, ensuring both sides benefit from a strong, strategic partnership. In contrast, purchasing is more concerned with efficient transactions and is less focused on developing deep vendor relationships.
What role does procurement play in an organization's strategy?
-Procurement plays a strategic role by ensuring that the organization gets the best value for its money, developing relationships with suppliers, and ensuring that the company’s needs are met both in the short and long term. It is more about value than cost.
Outlines
👋 Introduction to Procurement vs Purchasing
The video begins with a welcome message, introducing the main topic of discussion: the difference between procurement and purchasing. It highlights how these terms are often used interchangeably, but in reality, they hold distinct meanings. While a layman may see no difference between the two, a manager would be able to explain the significant distinctions.
🛒 What is Procurement?
Procurement is described as a comprehensive process involving the identification, selection, and acquisition of goods or services from third-party vendors. This process can involve direct purchases, competitive bidding, or tendering. Key goals include ensuring the timely delivery of goods or services with the right quality and quantity.
🛍️ What is Purchasing?
Purchasing is explained as a specific subset of the broader procurement function. It is a series of tasks related to acquiring goods and services, which includes activities such as ordering, expediting, receiving, and fulfilling payment. Purchasing focuses more narrowly on the transaction aspect.
🔍 Key Differences Between Procurement and Purchasing
The differences between procurement and purchasing are discussed in detail. Procurement is seen as a strategic and proactive process focused on identifying and fulfilling company needs, with an emphasis on value over price. In contrast, purchasing is more reactive, concerned with arranging expenditures and acquiring goods and services, with a focus on price rather than value.
🔑 Procurement's Role in End-to-End Processes
This paragraph highlights how procurement is involved in end-to-end activities for acquiring goods and services, from need recognition to sourcing, contract closure, and record keeping. Purchasing, on the other hand, is concerned with specific tasks like ordering, expediting, and payment.
🤝 Supplier Relationships in Procurement vs Purchasing
The focus on supplier relationships differs between procurement and purchasing. Procurement emphasizes building long-term, win-win relationships with suppliers. Purchasing, however, is more transactional and less focused on nurturing vendor relations.
📄 Conclusion and Further Resources
The video ends with an invitation to read more or download a PDF through the link in the description. The speaker encourages viewers to like, share the video, and subscribe to the channel.
Mindmap
Keywords
💡Procurement
💡Purchasing
💡Third-party Vendor
💡Competitive Bidding
💡Tendering
💡Reactive Process
💡Strategic Process
💡Supplier Relationship
💡Expediting
💡End-to-end Activities
Highlights
Procurement and purchasing are often used interchangeably but have distinct differences.
Procurement is a strategic process, involving identifying, selecting, and acquiring goods or services from third-party vendors.
Purchasing is a smaller subset of procurement, focusing on functions like ordering, expediting, receiving, and payment.
Procurement ensures timely delivery of the right quality and quantity through various methods, including direct purchases and competitive bidding.
Purchasing is a reactive process, primarily concerned with fulfilling immediate company needs.
The end goal of procurement is to address the company’s needs proactively, while purchasing focuses on arranging company expenditures.
Procurement prioritizes an item's value and long-term benefits over its cost.
Purchasing is more focused on the price of goods and services rather than their long-term value.
Procurement covers the end-to-end activities, from need recognition to sourcing, contract closure, and record keeping.
Purchasing comes into play when it’s time to physically acquire goods or services, emphasizing order placement and payment.
Procurement seeks to build long-term, win-win relationships with suppliers.
In contrast, purchasing focuses on efficient transactions and is less concerned with vendor relationships.
Procurement is considered a proactive process aimed at future planning and fulfillment.
Purchasing is seen as a reactive process that responds to immediate organizational needs.
Viewers are encouraged to read the full details or download a PDF via the link provided in the video description.
Transcripts
hi welcome to education leaves
in this video i am going to discuss the
difference between procurement and
purchasing
let's start the video procurement and
purchasing are the two terms that are
often used interchangeably
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
manager
you'll get a significantly longer answer
as to how
and why there's a world of differences
between purchasing and procurement
let's discuss what is procurement
procurement refers to the process of
identifying
shortlisting selecting and acquiring
suitable goods or services from a
third-party vendor through direct
purchase
competitive bidding or tendering process
while ensuring timely delivery of the
right quality and quantity
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
lets explains the differences between
procurement and purchasing
the end goal of procurement is to
identify the company's needs and fulfill
the procurement of those needs
it is a strategic and proactive process
on the other hand the end goal of
purchasing is to arrange company
expenditure and buy goods and services
for the company
it is a reactive process
in procurement places more importance on
an item's value than how much it costs
but in purchasing more focused on price
than value
procurement involved in the end-to-end
activities that needed to acquire all
necessary goods and services
procurement does everything from need
recognition to sourcing
contract closure and record keeping
purchasing gets involved when it's time
to buy goods and services
tasks involved in purchasing our
ordering expediting
and payment procurement focused on
developing long-term and a win-win
relationship with suppliers
on the other hand purchasing focused on
making efficient transactions
not overly concerned with developing
vendor relations
if you want to read in details or
download the pdf
go through the link in the description
like
share the video and don't forget to
subscribe to my channel
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