Procurement vs Purchasing: What's the Difference?

By Mackenzie Oakley | November 11, 2021

There are 16 pieces on a chess board and to get across the board in victory, you must utilize all the pieces in one cohesive strategy.

You wouldn’t approach a match with only one chess piece and no plan, so why would you approach your corporate purchasing policies with only one piece of the procurement process?

Procurement vs Purchasing

Procurement and purchasing are often used interchangeably, but their role in business have separate definitions and outcomes. Before you can identify the state of your internal procurement, there needs to be a clear distinction between purchasing and procurement.

Anyone can exchange money for goods, that is, anyone can execute purchasing. But procurement involves a great deal of strategy, research, negotiation, in addition to purchasing to ensure your company is running efficiently and cost-effectively. Procurement’s role is acquiring all of the goods and services that are vital for your business to function and thrive.

Purchasing is essentially just one piece of the procurement puzzle. To have a winning strategy, you need to have all the components of the procurement process in play.

How do you know if your business has a reliable procurement process versus just a purchasing plan? Here are a few questions to ask about your company’s spend:

1. Do you have a concrete strategy?

If you do, you are one step closer to having a solid procurement process.

If you don’t, don’t panic! It is never too late to gather your procurement team and put a strong strategy in place. While developing and implementing this plan may take an initial investment of time, it will generate money and time in the long run.

To create that winning procurement strategy, start with these four categories and flush it out according to your company’s goals:

  • Imagine your ideal future: Where do you want your company to be in a year, five years, or ten years down the road? How can you implement a thrifty procurement plan that will help you get to that goal?
  • Organize spending priorities: Take a look at what you are currently spending and prioritize based off the goals set step one.
  • Create obtainable objectives: Goal setting is important, but quantifying those goals with measurable objectives will be the key to success for your procurement strategy. Sit down with your team and tag your goals with key performance indicators and purpose for each actionable step.
  • Formulate and document strategy: Once you’ve answered those questions, be sure to  document and implement your procurement strategy. Don’t forget to monitor those objectives!

2. Do you know your Procurement-to-Pay cycle?

Your Procurement-to-Pay cycle will be different than any other company’s, so take the time to establish the key components.

  • What are the steps that your company needs to take from beginning to end in the procurement cycle?
  • What are your primary purchasing requirements? Are they recurring or are you accounting for off-the-cuff expenses?
  • Who handles the authorization and finalization process of buying?
  • Is there someone identified to follow up and maintain supplier relationships?
  • How are your invoices processed and stored?

3. Do you have a procurement team?

Not every company has a procurement department, but that does not mean every company should not have a procurement process. If you do not have all the resources to form an extensive procurement department, fear not. There is a way to access the expertise and services you need at no additional cost to your company.

Partnering with a group purchasing organization (GPO) will align you with a team of experts that know the procurement process well, and that will dedicate their experience in several different kinds of business to helping your company fire on all cylinders.

By partnering with a GPO like Una, you are ensuring not only an average of 22% off your purchasing needs, but you are also gaining a procurement partner in the process. There is no fee or commitment necessary to become a GPO member and sign up only takes minutes.

If you did have each of these questions covered within your company, chances are you have a solid procurement process in play. Congratulations!

If you did not, as is the case with most companies, let Una be an extension of your procurement team today and get that winning strategy in play!

For more help understanding procurement vs purchasing and how to implement a cohesive sourcing strategy, contact us today.

Search

Get new resources weekly!

Subscribe to Unaversity

Related Posts

Questions?

Get in touch with one of Una's expert Sourcing Advisors.

You can also...

schedule a meeting here.

By submitting this information you are agreeing to our terms of participation.