22 March, 2019

What is the Difference Between

Procurement and Purchasing?
 Download Brochure
Table of Contents

 1 The difference between procurement and purchasing

o 1.1 Procurement Vs Purchasing
o 1.2 What’s procurement?
o 1.3 What is purchasing?
o 1.4 Procurement and Purchasing Automation

The difference between procurement

and purchasing
The difference between procurement and purchasing is that one is a strategic
process and the other is a transactional function when sourcing and acquiring
products and services. Procurement concentrates on the strategic process of
product or service sourcing, for example researching, negotiation and planning,
whilst the purchasing process focuses on how products and services are
acquired and ordered, such as raising purchase orders and arranging payment.

Procurement and purchasing are two separate business processes that both
relate to the sourcing and acquisition of goods and services and can often be
seen as part of the procurement department.
Procurement Vs Purchasing

Despite procurement and purchasing tasks interchanging, they are separate

functions in their own right. A brief overview of the difference between
procurement and purchasing can be outlined as:

Procurement: Strategic process

 Identify needs and requirements

 Source and evaluate local, national or international supplier(s)
 Negotiate terms, conditions and contracts
 Build and manage supplier relationships
 Perform cost savings and profit margin analysis

Purchasing: Transactional activities

 Receive purchase requisitions

 Evaluate quotes from suppliers
 Raise and process purchase orders (PO)
 Receive goods/services and warehouse management
 Process and organise payment with supplier

What’s procurement?

The procurement process flow is the strategic process of sourcing a product or

service. This includes identifying a specific product or service requirement and
the steps on how a business finds new or existing suppliers, builds supplier
relationships, measures cost savings, minimises risk and is predominately
focused on value and return on investment.

A typical procurement process can involve the following steps:

 Identify a need
  Research and source relevant supplier(s)
 Create preferred supplier list
 Supply request for quotation (RFQ)
 Evaluate supplied quotes and suppliers
 Negotiate terms and contract with supplier(s)
 Arrange and receive product/service
 Perform quality check
 Analyse results, KPIs and margins
 Develop and maintain relationship with supplier(s)

Diagram: Procurement process example

What is purchasing?
The purchasing process is a sub-process of procurement and focuses on the
transactional phase associated with buying products and services. Activities
involved within the purchasing process include creating purchase orders and
ordering products / services, or receiving products and arranging payment. The
key focus of purchasing is being able to achieve short term goals that include
quantity, costs and timing.

A typical purchasing process includes:

 Receive a purchase requisition

 Evaluate received RFQs
 Create and distribute purchase orders
 Receive products / services
 Quality Assurance of received product / service
 Arrange payment to suppliers
Diagram: Purchasing process example

Procurement and Purchasing Automation

As procurement and purchasing processes can interchange within a business,

the acquisition of products and services can involve several decision makers,
departments and a high level of paperwork. This can cause process bottle
necks, slow down decision making and add complexity to the procurement
process. To help maintain supplier management, and have an overview of
negotiations and projects, many organisations utilise procurement software to
hold and manage critical information.

Procurement automation can help procurement and purchasing professionals

streamline the process of product and service acquisition by removing repetitive
data entry, improving the approval workflow process and enhancing report
generation. Automating key activities will help you to increase the visibility of
important information and aid decision making. Automated procurement
systems will enable employees to concentrate on core activities to add further
value within the business such as procurement strategy and improve supplier
relationships.

Typical procurement automation scenarios can include:

 Procurement software integration with accounting, ERP and WMS

systems
 Automating RFQs when stock levels reach reorder points
 Automated stock reorder notifications via email or SMS
 Automatic creation and distribution of purchase orders
 Automated order confirmation emails
 EDI integration
https://www.codelessplatforms.com/blog/what-is-the-difference-between-procurement-and-
purchasing/#What8217s_procurement