DIFFERENCES BETWEEN PROCUREMENT AND PURCHASING

DIFFERENCES BETWEEN PROCUREMENT AND PURCHASING

                Companies have developed various methodologies so as to provide themselves optimum material and service from the past to present. These methodologies are closed software systems, e-procurement, e-purchasing, e-commerce, etc. The point to understand before examining these systems is the difference between procurement and purchasing. Although the two processes seem basically similar or interrelated, there are some distinctive differences.

What is procurement?

Procurement includes end-to-end supply chain management in the process of collecting bulk materials, services or work. Supply chain management should have been completed with sourcing strategies, contract management, acquisition of materials, services or a work in the way of contract articles.

While the purchasing process only covers issues such as price, delivery and eligibility, procurement is a long-term business strategy that works in a comprehensive way to deal with the conditions affecting purchasing. A comprehensive procurement process includes:

               

  • Identification of needs as materials, work or service and planning of procurement,
  • Planning of a tender or a bidding duration,
  • Invitation to a tender or requsition of bidding from potential suppliers for the procurement process,
  • Analysis of tender or biddings,
  • Choosing of proper suppliers for the procurement duration,
  • Effective bargaining negotiations with chosen suppliers,
  • Contract management and Logistics planning,
  • Submission of the purchase order,
  • Procurement of materials, manpower or services,
  • Inspection of materials, manpower or services,
  • Invoicing, payment.

What is purchasing?

Purchasing is a simple buying process where businesses pay for materials or services. This process is generally preferred in small and medium sized enterprises. This process continues as releasing the order, contact with the supplier, payment, supply of material or service, and billing stages. A comprehensive purchasing process:

  • Determination of products or services to be purchased,
  • Sharing the purchase order with suppliers,
  • Evaluation of quotations,
  • Defining the purchase order and making the payment process in accordance with the payment terms,
  • Buying of materials or services,
  • Inspection of materials or services,
  • Payment and billing.

Scopes distinguish between the procurement process and the purchasing process. The procurement process is a long-term, the purchasing process is a short-term. While the procurement process examines the durability and quality of the products in detail, the purchasing process is mostly price oriented. In the procurement process, focus is on issues such as supplier capacity, risk analysis, spending control, and business ethics. In the purchasing process, the focus is on issues such as price, quantity, time and lead time. Purchasing is one of the parts of the procurement process.

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