difference between procurement and purchasing

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Difference between Procurement and Purchasing

By Aron


Procurement and Purchasing are two actions that are performed in relation to goods and
services and they are done with differences in their method and approach.

Procurement may be defined as the acquisition of appropriate goods or services at the best
possible total cost of ownership. This is done to meet the needs of the purchaser. The factors
or quality and quantity are taken into account in the act of procurement.

On the other hand purchasing is a form of buying that consists in getting the goods or
services by paying a certain amount of price or money. The amount of money or price paid in
the case of purchasing will be in accordance with the quality and quantity of the goods or
services. This is the main difference between procurement and purchasing.

It is thus understood from the definition given above that both procurement and purchasing
have the factors of quality and quantity common between them. It is important to note that
procurement is done to meet the needs of the purchaser in terms of time and location as well.
This is an important observation to be made in defining procurement.

There are two types of procurement called the direct procurement and the indirect
procurement. Direct procurement involves the acquisition of raw materials and production
goods. Indirect procurement involves the acquisition of maintenance, repair and operating
supplies.

An example of direct procurement is crude oil in petroleum industry. Similarly an example of
indirect procurement is lubricants. Acquisition of spare parts can also be cited as an example
under indirect procurement.

Purchasing is normally done by both individuals and groups such as companies and
organizations. On the other hand procurement is done mainly by companies and
organizations or such other groups.

It is important to know that procurement is a process in business organization and is said to
contain seven steps. These steps include information gathering, supplier contact, background
review, negotiation, fulfillment, consumption, maintenance and disposal and renewal.

Purchasing can also be divided mainly into two called direct purchasing and indirect
purchasing. Direct purchasing involves the method of paying cash or money directly and
getting the goods or the services delivered to your house. Indirect purchasing involves buying
of goods or services through the third party sources. It is interesting to note that timing of
purchases plays a very important role in the procurement systems.