While the terms are often used interchangeably, procurement and purchasing are two different things. We know it’s confusing, so we bring you this post!
If you’re wondering, “what is the difference between procurement and purchasing”, hopefully, we’ll be able to help you stop scratching your head with what we’ve offered here.
Procurement – the strategic edge
There’s a lot more to procurement than meets the eye. Encompassing vendor selection, the establishment of terms, vendor vetting, contract negotiation, and purchasing, procurement is purchasing plus. Procurement’s job to create the conditions necessary for the goods and services your company buys to be optimized.
Purchasing is, in fact, a facet of the procurement process but the effectiveness of purchasing is amplified by the work of procurement.
What that means in business terms
Strategic sourcing is at the heart of an effective procurement leader’s efforts. Effective procurement establishes stability in the supply chain by vetting vendors for supplier sustainability, minimizing the eventuality of interruptions and ruptures in the vital chain that gets the goods you need to your company.
Procurement combines several business functions that make it a vital part of any business, ensuring supply chain stability and setting favorable contractual terms via the contractual terms and pricing.
There are 4 pillars undergirding corporate strategy:
- Company capabilities
- Management issues
- Market placement
- Corporate identity
While perhaps the link isn’t immediately obvious, procurement embraces all 4 pillars. For example, your corporate identity may hinge on sustainable practices. If that facet of your identity isn’t readily apparent in your supply chain and procurement activities, you may have a public relations exposure on your hands. Today’s consumer is highly aware, and sustainability is top of mind in the prevailing market.
Procurement also reflects your market placement, which in turn reflects your corporate brand and what it stands for. Customers want to be associated with a brand which reflects their values and honors them. Your dedication to the integrity of your market placement is readily seen in your vendor selection.
Having the right people in place (which is a management issue) is crucial to projecting to the market your brand philosophy. These are the human resources who ensure you’re on track and modeling fidelity to corporate vision. Their capabilities are your company’s.
Purchasing – the transactional end
In sum, procurement is in the vanguard of corporate strategy, governing purchasing by optimizing it and making it work for your company, strategically. So, purchasing is part of the procurement process, not to be confused with the process itself. Creating the conditions for effective purchasing, procurement is a finely-tuned, process-oriented system.
While business terms are often used indiscriminately, these are two distinct functions. Think of it this way: purchasing is the transactional end of the procurement function, which is intimately related to corporate strategy. Procurement gives birth to effective, strategic purchasing.
We hope that helps!
CenterPoint Group is a trusted procurement leader deploying the power of numbers to obtain supply chain stability and enhanced purchasing muscle for our members. Contact us.