Purchasing and Procurement Differences

Overview of purchasing and procurement.  This doesn’t get into major details but is a good reference.

Purchasing and procurement are often used interchangeably, but they can refer to slightly different aspects of the supply chain management process.

Purchasing refers to the process of acquiring goods or services from external suppliers. It involves identifying the products or services that are needed, evaluating potential suppliers, negotiating prices and terms, and placing orders with the selected supplier. The goal of purchasing is to obtain the required goods or services at the best possible price and quality.

Procurement, on the other hand, refers to the overall process of acquiring goods and services, including both purchasing and other related activities such as strategic sourcing, vendor management, and contract management. Procurement also includes activities such as managing the inventory of goods and tracking the flow of materials through the supply chain.

In general, purchasing is a specific aspect of procurement that focuses on acquiring specific goods or services from external suppliers, while procurement encompasses a broader range of activities related to managing the acquisition of goods and services.

Procurement vs. Purchasing: A Simple Explanation

Imagine you’re planning a big party.

Purchasing

• The Shopper: This is like going to the store to buy specific items for your party, like chips, drinks, and decorations. You have a list, you know what you need, and you buy it.
• Focus: Short-term needs, immediate purchase, price.

Procurement

• The Party Planner: This person is in charge of the entire party planning process. They figure out what kind of party to have, create a budget, find vendors, negotiate deals, and make sure everything runs smoothly.
• Focus: Long-term strategy, relationships, cost-efficiency, risk management.

In a business context:

• Purchasing is a part of procurement. It’s about buying specific goods or services.
• Procurement is the bigger picture. It’s about managing the entire process of acquiring those goods or services, from finding suppliers to ensuring quality and cost-effectiveness.

Key differences:

Feature	Purchasing	Procurement
Focus	Short-term, transactional	Long-term, strategic
Scope	Buying goods or services	Entire acquisition process
Goal	Meet immediate needs	Optimize overall value

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To summarize: Purchasing is what you buy, while procurement is how and why you buy.

Purchasing and Procurement Training.

• ALL Procurement Blogs with details.
• B2B Purchasing Negotiation Five Strategies to Reduce Vendor Prices.
• Free Supply Chain Training.
• Meaningful Involvement in Services Purchasing with Lisa Ellram.
• Negotiation Skills: 3 Simple Tips.
• Procurement supplier selection process (10 minute video).
• Science Of Persuasion (11 minute video).
• Strategic Sourcing for Successful Supply Chain Management.
• Strategic Sourcing Plan (10 Minute video).
• Supplier Relationship Management Best Practices with David Wohler (6 minute video).
• Supplier Selection and Supply Chain Management.
• Supply Chain Training Resources.
• Typical negotiation mistakes of Procurement people.
• What are common issues that arise in procurement?  Facebook discussion.

Negotiation Quotes

• “You don’t want to negotiate the price of simple things you buy every day.” ~ Jeff Bezos – CEO Amazon.
• “Treating suppliers like partners is critical to a company’s start-up’s success. As much as possible, figure out how you can work with your suppliers to make their lives better, whether saving them money from their vendors or saving them time with your order. By understanding their business model, you can make orders in an efficient manner, which should lower costs for everyone.” ~ Aaron Schwartz
• “You have to persuade yourself that you absolutely don’t care what happens. If you don’t care, you’ve won. I absolutely promise you, in every serious negotiation, the man or woman who doesn’t care is going to win.”  ~ Felix Dennis
• “If you are planning on doing business with someone again, don’t be too tough in the negotiations. If you’re going to skin a cat, don’t keep it as a house cat.” ~ Marvin Levin
• “I want women to get paid more. I want to teach them to negotiate so they get paid more.” ~ Sheryl Sandberg
• “Appraisals are where you get together with your team leader and agree what an outstanding member of the team you are, how much your contribution has been valued, what massive potential you have and, in recognition of all this, would you mind having your salary halved.” ~ Theodore Roosevelt
• “Negotiation is not a policy. It’s a technique. It’s something you use when it’s to your advantage, and something that you don’t use when it’s not to your advantage.”  ~ John Bolton
• “Know what you want to achieve prior to starting to negotiate. It’s the golden rule but the one most people fail to heed. Without a plan, you allow the opposing party to define your goals instead of the other way around.” ~ Ivanka Trump