Asked by : Devi Kaladeen, Audit Manager, Health Sector Development Unit
Industry : Management & Strategy Consulting
Functional Area : Purchasing
Activity: Question posted: 02 11 2009 06:01:28 +0000, 9 answers, 16342 views, last activity 07 06 2010 20:18:08 +0000
Too often it is observed that the two terms 'purchasing' and 'procurement' are used interchangeably. Do you think they serve the same purpose? Differentiate between the two terms.
Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quantity and quality, at the right time, in the right place and from the right source for the direct benefit or use of corporations, or individuals, generally via a contract.Simple procurement may involve nothing more than repeat purchasing.
Purchasing refers to a business or organization attempting to acquire goods or services to accomplish the goals of the enterprise. Though there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly between organizations. Typically the word “purchasing” is not used interchangeably with the word “procurement”, since procurement typically includes Expediting, Supplier Quality, and Traffic and Logistics (T&L) in addition to Purchasing.
In short, the consensus around the table was that ‘purchasing’ was still viewed by much of the business world as an administrative function, linked back to order management. Whilst ‘procurement’ steps away from the transactional side and is seen as more of a strategic function.
or Procurement is concerned with the overall gathering of resources, while purchasing is the specific act of acquiring something by paying money for it. Purchasing is one form of procurement.
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Yes there is a change in these terms.Procurement refers to start from the initial stage ie, designing/sourcing/processing/negotiating/fixing standards etc and purchasing refers to fulfilling the commercial aspects of procuring the commadity viz releasing purchase prders/tracking delivery schedules/till bringing the commadity to site.
Procurement is acquisition of goods or services and normally goes through series of processes to acquire the goods or services but purchasing involves exchange of money for the goods and services as a way of acceptance. In simple terms procurement is having the goods or service without commitment and purchasing is taking ownership paying the agreed amount of the goods or services.
Yes, Procurement is a much wider term that is used to describe the process of acquisition for business use, of material/equipment and services. This would include hiring/renting, bailment, loan (of equipment/services from a supplier/contractor/competitor/associate/partner/stakeholder in return for a like favor), charter (of ships/vessels), and contracting, in a limited sense. This by no means is a comprehensive list. With the markets being what they are, there are some very innovative ways of procurement being devised out there as we speak.
Purchasing, on the other hand, is acquisition of materials/services where ownership is transferred completely (I am not getting into IPR, salvage and buy-back issues and their implications here for the sake of simplicity) in exchange for money, is just one of the modes of Procurement.
Procurement includes the processes (strategic function) to purchase or acquire the products, services, or results needed from outside the project team to perform the work. It involve contracts that are legal documents between a buyer and a seller.
Purchase process (administrative function) identifies which project needs can best be met by purchasing products, services, or results outside the project organization, and which project needs can be accomplished by the project team during project execution. This process involves consideration of whether, how, what, how much, and when to purchase. Purchasing falls under procurement.
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Very nice article....the youths of today should read this. It so sad that children of today hardly take time to stop and think of how hard their parents work so they can have a good life. Thanks for posting.