The Difference Between Purchasing And Procurement
CONTRIBUTED by AFFLINK
Many facility managers and industry professionals do not realize there is a big difference between purchasing and procurement. Very often these two terms are used interchangeably. However, they are very different, if for no other reason than that a professionally planned procurement strategy can save buyers as much as 12 percent on supply costs annually.
"Because of the potential for significant [cost] savings, we need to understand what these two terms mean," says Michael Wilson, vice president of marketing and packaging for AFFLINK, a membership-based sales and marketing organizations.
According to Wilson, the following are some of the key differences:
— Purchasing deals with how a product or service is ordered. Procurement deals with why the product or service was ordered.
— Purchasing is a transaction and does not involve strategy. Procurement is a strategy to address a facility's or customer's specific needs.
— Purchasing works primarily with existing vendors. Procurement involves selecting vendors based on terms, vetting, pricing, and product quality.
— Purchasing focuses on selecting products when needed. Procurement focuses on cost savings, risk reduction and delivery options.
— Purchasing primarily concerns ordering products or services. Procurement involves relationship building with vendors, negotiation, research and customer needs.
— Purchasing focuses on price and delivery. Procurement focuses on value and total cost of ownership.
— Purchasing is often an automated process. Procurement involves people along with automation.
"As you can see, it's much more than just semantics," says Wilson. “What is probably the key difference is that purchasing is something we do quickly when we need a product or service. Procurement, on the other hand, involves building relationships and the selection of goods and services based on the value they bring to the table."
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