Procurement vs Purchasing | Difference between Procurement and purchasing

Summary

This 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.