Procurement is the proactive process of purchasing goods and services needed for the organization. It is strategic. Procurement involves supplier qualification, contracting, payment, and delivery. It focuses more on the product's value than the cost and is dependent on supplier relationships.

Purchasing is reactive and includes the set of activities directly associated with acquiring goods and services for a business. It is tactical. It involves expediting, receiving, acknowledging, and paying for the items. Purchasing focuses more on the product's price.

Procurement vs. Purchasing: What’s the Difference?

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Procurement is often mistaken for purchasing, and the two terms are often used interchangeably. But those two functions are actually quite distinct—in their intent, the tasks they cover, the people involved, and, most notably, what they accomplish.

If you ask a layman about the difference, you may get a reply that purchasing and procurement are one and the same. But, if you ask the same question to a procurement officer of an enterprise, you’ll get a significantly longer answer as to how and why there’s a world of differences between procurement and purchasing.

It is true that a few organizations prefer to use one term over the other, but failing to learn the key differences between purchasing and procurement can make an organization overlook key components that have the potential to break an organization’s bottom line.

Now, let’s dive deeper into the concept of procurement vs purchasing, and see how they differ from each other.

What is procurement?

Procurement is the process of identifying, shortlisting, selecting, and acquiring suitable goods or services or works from a third-party vendor through a direct purchase, competitive bidding, or tendering process while ensuring timely delivery of the right quality and quantity.

An end-to-end procurement process consists of the steps listed below:

Surveying the market
Spotting potential suppliers
Creating an approved list of vendors
Spotting internal needs
Creating a purchase order online
Requesting proposals and evaluating quotations
Selecting the right supplier and negotiating effectively
Receiving goods and performing quality checks
Developing and managing contracts
Obtaining invoice approvals and fulfilling payment terms
Establishing a good supplier relationship

What is purchasing?

Purchasing is the set of functions associated with acquiring the goods and services that an organization requires. Purchasing is a small subset of the broader procurement function. This process includes activities like ordering, expediting, receiving, and fulfilling payment.

Listed below are the steps in the purchasing process:

Obtaining a purchase requisition
Requesting proposals and evaluating quotations
Dispatching official purchase orders
Receiving products and services
Checking the quality of delivered items
Effecting payment to vendors

Procurement vs. purchasing: similarities and differences

Procurement and purchasing are two processes that are done during the process of acquiring goods and services for an organization. However, they vastly differ in their method and approach. This table represents the main differences between procurement vs purchasing:

Procurement	Purchasing
Activities related to acquiring goods and services	Functions associated with buying goods and services
Steps that happen before, during, and after purchase	The straightforward process of purchasing commodities
Used in a production environment (internal process)	Used in a wholesale environment (external process)
Puts more importance on an item’s value than its cost	Tends to focus more on the item’s price than its value
Refers to a set of tasks that spot and fulfill needs	Refers to the specific task of committing expenditure
Includes need recognition, sourcing, and contract closure	Includes ordering, expediting, and payment fulfillment
Follows a proactive approach to spot and fulfill needs	Follows a reactive approach to satisfy internal needs
Relational–focuses on creating long-term vendor relationships	Transactional–focuses on transactions than vendor relationships

In addition to the list of differences mentioned above, procurement vs. purchasing includes another major difference. Purchasing focuses on short-term goals such as fulfilling the five rights in a transaction (right quality, right quantity, right cost, right time, and right place), whereas procurement focuses on strategic, long-term goals like gaining a competitive advantage or aligning itself with corporate strategy or goals.

The impact of an e-procurement solution

Whether you look at it as purchasing or procurement, there are a number of stakeholders involved–from internal parties like employees in different departments to external people like vendors and contract negotiators. Irrespective of the differences mentioned in the procurement vs. purchasing table, both processes demand meticulous documentation. They both comprise a complex web of procedures.

A single purchasing cycle might last for weeks, whereas a whole procurement cycle can last for months or even be repeated if a suitable bid is not found. If performed manually, both activities will have a common detriment of efficiency. Just the process of revising every document, evaluating every bid, and reviewing every invoice will cause too much delay. A comprehensive digital procure-to-pay solution, on the other hand, allows organizations to store all purchasing and procurement-related files in one centralized database.

While a shared network drive can fulfill this purpose, cloud-based procurement software like Kissflow Procurement Cloud can automate tasks and offer a level of convenience and efficiency that a manual system simply can’t match.

Procurement or purchasing, who is the winner?

In the battle between procurement vs. purchasing, there is no clear winner.

Companies should pick an approach based on their unique needs. Small businesses may choose to purchase with an intention of keeping the process clean and simple, whereas enterprises may prefer a full-fledged procurement process just to make it a core part of their corporate strategy.

Whatever approach you choose to follow, manual tools like paper forms, spreadsheets, and word documents will end up doing more harm than good. Cloud-based procurement software like Kissflow improves productivity by standardizing strictly regulated processes like procurement and purchasing.

Thinking of revamping your purchasing or procurement process? Take a look at the list of benefits an ideal procurement software can offer your procurement team and help you create painless procurement processes from start to finish–PR to invoicing and payment.