How procuring is different from purchasing?

How procuring is different from purchasing?

There’s a thin line of difference between purchasing and procurement that often goes unseen by people and thus, they use these terms interchangeably. However, this thin line of difference is what makes purchasing and procurement two completely separate process and sectors of business. So, let’s clarify the difference here.

Procurement is a wider concept and process than purchasing; and as a matter of fact, the latter is actually a part of the former. In simpler terms, procurement is a process that involves listing down the vendors, working on the payment terms and modes, selecting the right vendor by weighing the proposal on different criteria, negotiating the contract, and then finally purchasing the goods.

This makes it clear that procuring goods and services is different from mere purchasing. It’s a broader notion and process that needs to be done under certain parameters. One of the most important parameters to consider while procuring or looking for a procurement service provider is ethics.

Every business be it the one developing or developed works on certain ethics, and thus, when it comes to procuring, you need to make sure that your business and your procurement company’s ethics match. For instance, if you follow environmentally safe guidelines for your business, you need to join hands with the outsourcing company that works on similar lines.

The Procurement Process

By now it must be quite clear that procurement is a little complex than purchase of goods and services. However, it can be made simple if you take one step at a time from the three major stages :

Pre-procurement

Identifying your specific requirement

Authorizing the purchase request

Getting approval of purchase request

Procurement

Identifying different procurement companies

Getting quotations

Negotiating the quotations

Selecting the vendor

Creating purchase order acknowledgement

Sending advance shipment notice

Collecting goods’ receipt

Payment to the procurement company

Recording invoice

Checking through 3 way match

Making payment to the vendor

The above mentioned steps include every minute detail you need to undertake while procuring goods and services. However, depending on the nature and size of the business, a few of the steps can be cut down. For instance, if you are a big firm dealing with an array of goods and services, then you certainly need to pen down your specific requirements. However, if you are a small firm or a company dealing with just one commodity, you already know what you need.

Having said that, there are a few steps that have to be followed for the smooth running of the process irrespective of the nature and size of business. These steps include having the purchase order acknowledgement, creating advance shipment notice, keeping the goods’ reciept and recording invoice. You need to have a proper paper trail of all these, ensuring that at the time of need you have all the documents handy.

The Purchasing Process

As aforementioned, purchasing is a part of procurement. Thus, there are certain steps of the procurement process that lay the grounds for purchasing as well, and they are:

Creating purchase order acknowledgement

Sending advance shipment notice

Collecting goods’ receipt

Recording invoice

Checking through 3 way match

Making payment to the supplier

Now while in procuring, the steps depended on the size and nature of business, in purchasing these are the basic fundamental steps that have to be followed. So be it a big or a small business, if it wishes to establish a solid and smooth purchasing framework, these are the steps to be followed.

Conclusion

Since purchasing is a sublet of procurement process, these two terms are often used by businesses interchangeably. It’s quite common that these two terms are used without acknowledging the thin line of difference they have; but it should be avoided.

In a nutshell, procurement is an extensive process of identifying you needs, finding the right outsourcing company, negotiating and then finally strategically selecting goods and services. On the other hand, purchasing is related to only ordering of goods and services.

Rate this article
related post
No Comments
leave a comment