What’s the Difference

Between Purchasing and

Procurement? Why Does It
Matter?3 min read
Posted on January 30, 2019 by Joël Collin-Demers

I’ve heard “purchasing” and “procurement” used

synonymously more times than I can count. Though these
terms refer to concepts in the same realm, it’s important to
understand the nuance between the two when “nerding
out” in functional discussions (Oh… Am I the only one who
does that?). All kidding aside, the distinction is important
enough that the Chartered Institute of Procurement and
Supply (CIPS) changed the “P” in their acronym from
“Purchasing” to “Procurement” in 2014. Using the right
term in your discussions is a question of credibility with
other procurement professionals when trying to drive points
home.

Defining the Terms

I define procurement as the complete set of strategic,
tactical and operational processes that companies use to
optimize supply outcomes for needed external goods and
services. This includes:

Spend Analysis & Sourcing

Negotiation & Contract Management
Operational Purchasing (Procure-to-Pay)
Accounts Payable
Vendor Data & Performance Management
All other processes supporting procurement activities

Purchasing, on the other hand, is a reactive, transactional

process which starts with a requisition and finishes with
invoice payment to a supplier. This includes:

Stock Purchases (Inventory)

Non-Stock Purchases (Expense)
Subcontracting
Consignment
Etc.

Essentially, a company can purchase without procuring

(although I would argue that it shouldn’t!) but the opposite
is not possible .

Purchasing is a process, procurement is a function.

To further help illustrate the distinction, CIPS highlights that

procurement aims to provide the following benefits to the
business:
 Security of supply
Lower costs
Reduced risk
Improved quality
Greater added value
Increased efficiency
Innovation

In contrast, purchasing simply aims to get the right good or

services to the right place at the right time at a reasonable
price.

Why Does It Matter?

If your company has a “purchasing” function instead of a
“procurement” function, it says a lot about the relative
importance attributed to the function within the
organization. This has an effect on employee, potential hire,
supplier and industry perceptions of your procurement
maturity level.

Additionally, if you’re to have any success establishing a

clear and effective corporate procurement policy, defining
terms is critical. Rules can only be effectively defined and
subsequently enforced if a common language between you
and your stakeholders exists. If they are to remain engaged
and view procurement as a valuable function, you need to
make it easy for them to come into your world.
Purchasing is about transactions that get you what you
want when you need it. Procurement is about building long
term, win-win relationships with partners to get the whole
supply chain performing at the next level; it’s about
maximizing value creation for the company.

To start procuring instead of purchasing, all you need to do

is start exploring the “why” behind purchasing decisions in
addition to the logistical “how”? If you’re already doing this,
start integrating the word that demonstrates it into your
organization (naming conventions, roles, vocabulary, etc.).

The rest will follow.

———————————
Does your company have a “purchasing” or a
“procurement” function? Do you feel it reflects the overall
functions’ maturity? Are you thinking about the “Why”
behind your buying decisions?
Let me know in the comments.

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