Posted By : Admin Thursday, March 15, 2018 12:52:16 PM
A lot of people are using the wordings Purchase and Procurement as a synonym with the same content and sometimes they are even overstrained with an explanation of the word Sourcing. Lets clarify all the confusion on the differences between the words of:
Purchasing compared with Procurement:
Purchasing and Procurement are two different actions which are executed in regards to parts / products and services. The main differences of Purchasing and Procurement are in their method and approach. Procurement could be defined as the most suitable acquisition of parts / products and services at the best possible price under consideration of the total cost of ownership (TCO). This is done to fulfill the needs of the Purchasing department. The parameters of quantities and quality are considered in the activity of Procurement.
On the other side, Purchasing is a kind of buying which consists to get the parts / products and services by paying a certain amount money. The amount of money which needs to be paid for parts / products and services will be according to the quantities and the quality and this is the main difference between Purchasing and Procurement. As explained just now, Purchasing and Procurement are having the same common parameters such as quantities and quality. Additional to that it is important to know, that the Procurement activities are a kind of pre-work in order to meet the requirements of the purchaser in regards to time and the location.
Procurement compared with Sourcing:
Many people are irritated with the meaning of Procurement / Sourcing and substituting or using them as a synonym which is incorrect. There are some differences between Procurement and Sourcing which will be explained as follows. Procurement and Sourcing are closer in their meaning compared to the word Purchasing. However, within the Procurement process are more activities covered such as specifications development, value analysis, supplier market research, buying activities, strategic negotiation, administration of contract, control of inventory and so on.
On the other side, Sourcing is the sub-process of identifying sources (suppliers) which could full fill the required needs like parts / products and services of an organization. Procurement is the Sourcing of parts / products and services at the lowest possible cost with the right quality and the required quantity of time. To explain it in the easiest way: Procurement is not more than Sourcing. But since the organization sizes increases, Procurement gradually becomes wider and Sourcing has more and more importance in regards of competitiveness. Sourcing is a sub-process of the complete procurement process which includes a lot of more activities.
Since Purchasing and Sourcing are sub-processes within the whole procurement process, all the three wordings are often used as synonyms which is incorrect but all the processes of purchasing, sourcing and procurement are equally important to an organization.
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