Purchasing Vs. Procurement: What Is The Difference?

Purchasing and procurement are two words that we often seen used interchangeably. This mostly occurs among non-professionals, where the word procurement is used instead of purchasing and vice versa. While the two might appear to share the same meaning, they have different functions. 

The inability to identify the differences between the terms may lead businesses or individuals to utilize them poorly in relevant areas. To avoid this, we first need to understand the differences between purchasing and procurement. Without further ado, let us see how they differ from each other.

Procurement

Procurement deals with the strategic process of products and services of sourcing, researching, identifying, listing, planning, agreeing, and ordering from an external source. This can be done via competitive bidding, tendering, or direct purchase processes. The procurement process ensures that the internal needs of an organization are met. It determines the relationship with the external supplier to achieve a certain level of service.

The procurement process entails a series of steps that includes:

  • Identifying the goods and services needed
  • Choosing the right suppliers
  • Making purchase orders to suppliers
  • Agreeing on delivery methods and lead time
  • Having goods and services delivered to you
  • Performing quality checks on the items procured
  • Invoice approval and payments to the supplier upon receipt of delivered items
  • Creating a relationship with the supplier for future engagements

These procurement steps will help you get the most out of your relationship with an external supplier.

Purchasing

Purchasing is a less strategic process that involves the transactional phase of the procured goods and phases. It focuses on getting what the organization needs. In other words, this process entails creating orders, making payments, and receiving the goods and services paid for. The main purpose of the acquisition of the goods and services by the organization is to accomplish its strategic business goals. 

The purchasing process includes the steps highlighted below:

  • Getting a purchase requisition
  • Evaluating the proposal and estimate quotations
  • The evaluation of alternatives
  • The distribution of purchase orders
  • Receiving quality products and services
  • Ascertaining the quality of the received products and services
  • Making payments to vendors

Unlike the procurement processes listed earlier, the purchasing processes are not streamlined to match the size and scope of each business

E-Procurement Malaysia

For large businesses, the acquisition of the products and services can involve an intricate and complex network of procedures. Decision-makers such as employees, vendors, and other relevant parties are usually involved – leading to the complexity of the procurement or purchasing processes. 

As the process for both procurement can be lengthy, documenting the whole transaction is essential for effective monitoring and control. To ensure efficiency, bids need to be reviewed as well as evaluating the products and services. Bids need to be reviewed, and the products and services evaluated to ensure efficiency. Without proper documentation, the whole process can get muddled up, resulting in bad investment in services and products. This is where E-procurement comes in.

E-procurement automation can help procurement professionals tailor the process of products and services acquisition to become more transparent, have less data-entry errors, and boost the workflow process. Automating the procurement process ensures information vital to making key decisions is visible. E-procurement automation also enables employees to focus on core areas of the business to improve and enhance supplier relationships.

The procurement data is stored in a centralized base and easily accessed by specific persons, such as the procurement specialist and procurement manager. The database is cloud-based to ensure efficiency and convenience in accessing vital information of the procurement.

How E-Procurement Automation Can Boost Efficiency

The e-procurement automation forms the backbone of a procurement cycle. Whether it is minimizing human errors or bettering and maintaining customer relationships, e-procurement automation is an invaluable tool for your business in ways such as:: 

  • Cuts down approval process time
  • Enhances overall transparency
  • Keeps a central record of your previous transactions
  • Total control of the procurement cycle

E-Procurement Automation is the Future

Regardless of what business approach you choose, procurement or purchasing, you should keep documentation of the entire transaction process for transparency and convenience. A cloud-based e-procurement solution, like ADAM that Supply Cart offers is what every business organization needs to make data entry easy and process efficient. For more information, feel free to get in touch with us.

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