Procurement and purchasing are often used interchangeably as words, but they’re two distinct animals. In fact, purchasing is part of the procurement cycle. It’s not the whole picture, though.
Procurement is an end to end process, with the result of that process being purchasing. From vendor selection and vetting, to establishing payment schedules and contract terms, the purchase begins with finding what you need, setting up responsive relationships and then defining them in a continual process of renewal.
There’s a lot more to it than just buying stuff.
A core service.
Procurement is an expression of the way your company does business, so whether your procurement is in house or outsourced to a GPO, it’s a function of your business that touches on key aspects of its infrastructure.
Your corporate identity is touched on by procurement, due to the ethical framework from which vendors are sourced. This guides decisions about vendors and their management, through instruments like codes of conduct. Corporate identity is linked to market placement, wherein your customers and their relationships with your company and its identity is played out.
Corporate strengths and weaknesses, as well as growth and long-term goals are also implicated in the procurement process, as cost reductions via procurement enable organizational goals. The impact on profitability and this factor’s importance to reinvestment in your business are obvious.
Procurement directly influences the strength of your enterprise by helping to make the most from available resources and growing those resources for the future.
Purchasing – the last link in the procurement chain.
So, procurement vs. purchasing is a matter of a process against a function in that process. These terms are often interchangeable, but they probably shouldn’t be.
Purchasing is a simple transaction, whereas procurement is a strategic activity, with a clear set of priorities, linked directly to corporate identity, philosophies and goals.
Much of procurement’s work is in protecting the brand of the organization it’s procuring for in the vendor selection process. Ensuring sustainability and ethical practice down the supply chain is a public relations exercise. It matches corporate identity with suppliers who are equal to the task of maintaining it in good order, without damaging it.
Procurement as a core function of corporate strategy is a complex set of actions which calls on procurement teams to foster transparency, negotiate mutually agreeable contacts, maintain solid relationships down the supply chain and interpret data effectively, with an eye to continual improvement in the process.
Procurement vs. purchasing is not unlike a comparison between a 747 and a glider. One is complex. The other, simple. Because they’re two related, but very distinct functions, we felt we needed to clear the air with this simple primer on the topic.
CenterPoint Group is a trusted procurement advisor, serving our members by delivering substantial savings on everyday purchases.
From office supplies to cell phones and shipping, we leverage a pool of member resources to bring members cost reductions on a range of goods and services.