It’s common for people to use the terms procurement and purchasing interchangeably, but there are distinct differences in these processes. How do you know if you need procurement vs purchasing for your business or organization? Consider these goals of each process to understand the differences and identify the right tools for your business.
Similarities and differences: Procurement vs purchasing
Both procurement and purchasing have interchangeable tasks involving the sourcing or acquisition of products and services. The main difference is that procurement is a strategic process, while purchasing is transactional in nature. The purchasing process is less complicated and is often a step that happens within the procurement process.
- Purchasing is the process of buying goods or services. Related activities include creating and managing purchase orders, receiving orders, and paying vendors or suppliers.
- Procurement focuses more on the acquisition of goods and services for organizational use. Activities include identifying needs, planning, sourcing, negotiations, contract management, ordering, receiving, and processing payments.
Procurement prioritizes long-term, strategic goals while purchasing focuses on short-term goals and immediate fulfillment of products and services. Procurement places more importance on an item’s value, while purchasing is more focused on the unit price.
Procurement and purchasing process flows
A procurement process flow involves building supplier relationships, minimizing risk, and prioritizing return on investment (ROI). Typical steps in the procurement process include the following:
- Evaluate the need
- Source suppliers
- Select preferred suppliers
- Request quotes
- Evaluate quotes
- Negotiate supplier terms
- Arrange product or service delivery
- Monitor for quality
- Analyze margins, KPIs, and results
- Maintain ongoing supplier relationships
Purchasing is a subprocess within procurement. The main focus of a purchasing process flow is on managing costs, quantity, and delivery timing. Here’s an example of an effective purchasing workflow:
- Obtain a purchase requisition from the procurement process
- Review and evaluate supplier quotes
- Generate and issue applicable purchase orders
- Receive services and products
- Review quality indicators
- Pay suppliers
Leveraging automation for procurement and purchasing
In most businesses, various departments participate in procurement and purchasing workflows. When multiple decision-makers get involved, this adds a layer of complexity that often causes bottlenecks or slows down the process.
Automation can help both procurement and purchasing teams streamline their processes. Manual systems, such as paperwork and spreadsheets, can be problematic because of the risk of error. Automation minimizes these risks by decreasing redundancies and optimizing the approval workflow. Ultimately, automation aids decision-making by improving visibility for everyone involved.
Automation also frees up team members to focus on value-adding activities. By reducing busy work and redundancies, employees prioritize more time on core responsibilities such as optimizing profit margins or building relationships with suppliers.
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