Procurement vs Purchasing – Cheat Sheet.
Quick way to get up to speed on Procurement vs Purchasing. What is the difference?
- Procurement is a strategic, comprehensive process focused on long-term goals like value creation, risk management, and supplier relationships.
- Purchasing is a transactional, operational activity that is part of the broader procurement process, focusing on ordering and paying for goods or services.
Greater Detail, Expanded from Above:
| Aspect | Procurement | Purchasing |
|---|---|---|
| Definition | End-to-end process of acquiring goods and services, from identifying needs to receiving goods/services. | A subset of procurement that focuses on the actual buying of goods and services. |
| Scope | Broad: Includes sourcing, negotiations, vendor relationships, and strategy. | Narrow: Focuses on transactional tasks such as ordering and payment. |
| Objective | Ensure value for money, long-term supply relationships, and strategic sourcing. | Obtain goods/services at the best price in the shortest time. |
| Involvement | Engages with multiple departments (finance, legal, operations, etc.). | Typically focused within the procurement or finance departments. |
| Process Flow | Involves needs assessment, sourcing, supplier evaluation, negotiations, and contract management. | Involves purchase orders, order placement, receipt of goods/services, and payment. |
| Decision-making | Strategic: Focuses on quality, value, and long-term partnerships. | Operational: Focuses on day-to-day transactions and cost efficiency. |
| Vendor Relationships | Emphasizes relationship management, partnership building, and performance evaluation. | Focuses more on transactional interactions (placing orders, payments). |
| Time Horizon | Long-term strategy to ensure future supply and value. | Short-term and immediate needs fulfillment. |
| Key Metrics | Total cost of ownership, supplier performance, value creation, and risk mitigation. | Price per item, delivery times, and payment terms. |
| Risk Management | Proactively manages risks like supplier dependency, compliance, and supply chain disruptions. | Limited risk focus, mainly around ensuring on-time delivery and correct pricing. |
| Involves Contracts? | Yes, often involves negotiating and managing complex contracts with suppliers. | Rarely involves contract negotiation, focused on following existing agreements. |
| Examples | Choosing suppliers, negotiating long-term contracts, managing supplier performance. | Issuing purchase orders, processing invoices, receiving deliveries. |
Explained Simply:
Procurement is the overall process of finding and getting the right goods or services for a company, including things like choosing suppliers, negotiating contracts, and managing relationships.
Purchasing is just one part of procurement and is mainly about buying the goods or services, placing orders, and paying for them.
In short:
- Procurement = the big picture (finding, negotiating, managing).
- Purchasing = the actual buying part.
Procurement and Purchasing Quotes
- “During a negotiation, it would be wise not to take anything personally. If you leave personalities out of it, you will be able to see opportunities more objectively.” ~Brian Koslow
- “Information is a negotiator’s greatest weapon.” ~Victor Kiam
- “A sign that negotiations were handled well on both sides is that everybody probably feels a little bit like they didn’t get what they wanted.” ~ Christopher Lloyd
“If your first objective in the negotiation, instead of making your argument, is to hear the other side out, that’s the only way you can quiet the voice in the other guy’s mind. But most people don’t do that.” ~Christopher Voss - “The most important investment you can make is in yourself.” ~Warren Buffett
- “The most difficult thing in any negotiation, almost, is making sure that you strip it of the emotion and deal with the facts. And there was a considerable challenge to that here and understandably so.” ~Howard Baker
- “Negotiations are worthless if neither party is willing to budge.” ~Dave Waters
