Have We Made A Salad Out Of Procurement, Purchasing And Buying?

June 19, 2017 Prof. Dr. Perumal Magayson

Have we made a Salad out of Procurement, Purchasing and Buying?

 

In the current context, the terms purchasing and procurement are interchangeably used, and despite their similarities they mean different.

Procurement involves the process of selecting vendors, establishing payment terms and strategic vetting.

 

 

 

Procurement is, essentially the overarching function at strategic level, where purchasing is a subset.

Purchasing and Procurement

Because procurement is a strategic term that includes several core business functions, it is a core part of any organization’s corporate strategy.

The aspects of corporate strategy include: Company Identity, on what the company do, their beliefs and their business model encompassing the Organization’s Capabilities.

This is what procurement focuses on thus procurement and company’s identity are entwined. If the organization business has built its identity around an environmentally cognizant ethic, than your procurement strategy should reflect that decision. Policies should be in place to ensure you are sourcing from companies with similar principles, or that you are sourcing materials that are not environmentally hazardous.

The Organization’s proficiencies and management issues, should also reflect that branding and have the right people in place to put into action the beliefs/philosophies of the business.

And clearly, the strategic objective would be to develop Integrated Strategies that

Support Organizational Strategies, Goals of Procurement deals with the sourcing

activities, negotiation and strategic selection of goods and services that are usually of importance to an organization. Most importantly, developing strong relationships with other functional groups

 

Purchasing at Tactical LevelPurchasing Cycle

Purchasing can usually be described as the transactional function of procurement for goods or services.

The process of purchasing is known as the Procure-To-Pay Cycle. The entire Procure-To-Pay Cycle is a process with numerous steps in the identification of requirements of the end-user, authorization of purchase request (PR), and identification of suppliers.

Purchasing plays a critical role in negotiations, selection of appropriate vendors and approval of payment to vendors. In a large, multinational corporation, the process undergoes a more involved “Identification of Requirement” phase. On the other hand, if in a small firm, that stage may be quick and simple.

Buying on the other hand generally refers to simply buying goods or services and is more an operational role..

 

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