Difference between Purchasing and Procurement

Understanding the Difference Between Procurement and Purchasing



Have you ever wondered about the distinction between procurement and purchasing?

Procurement vs. Purchasing:

To comprehend the dissimilarities between procurement and purchasing, Imagine you are buying a new car. Before setting foot in a dealership, you determine your requirements, such as the number of seats, type of vehicle (sedan, SUV, etc.), and specific manufacturers that interest you.

This initial phase of gathering information and exploring options is procurement. It involves researching the market, evaluating different suppliers, and matching their products to your needs.

Once you have a clear understanding of what you want, you move on to purchasing. This phase entails obtaining prices and making a final selection. However, purchasing involves more than just the price tag. Factors like service capabilities, warranties, and dealership reputation also come into play.

Therefore, purchasing encompasses the transactional aspects of securing the chosen product or service, considering additional criteria beyond price alone.

Relationship between Procurement and Purchasing:

Procurement and purchasing are closely linked, although they can be separate functions in certain scenarios.

In larger organizations, procurement sets the framework for purchasing activities. A purchasing manager typically relies on the procurement team to establish contracts before making any procurement-related decisions.

However, in smaller businesses, these functions might be carried out by the same person or a senior individual who coordinates both procurement and purchasing activities.

Category Management and Supplier Relationship Management:

Apart from understanding procurement and purchasing, two other terms often arise in this context: category management and supplier relationship management. These concepts further enhance the procurement process.

Category management involves determining how and where to allocate expenditures within the business. It helps define spending patterns and strategies. The sourcing team then works on securing the supplies outlined by category management.

Finally, the supplier relationship management team ensures that suppliers meet the organization’s requirements and perform accordingly.

Procurement Reporting Structure:

A frequently asked question is where procurement should report within a company’s organizational structure. While it can vary,

Procurement reporting structures can vary depending on the organization and its specific needs. While there is no one-size-fits-all answer, several factors typically influence the decision of who procurement reports to within a company’s structure.

Here are some key factors to consider:

Organizational Size and Structure:

In larger organizations, procurement may report to a senior executive, such as the Chief Procurement Officer (CPO), Chief Financial Officer (CFO), or Chief Operations Officer (COO). The reporting structure is often determined by the organizational hierarchy and the importance placed on procurement within the company.

In smaller organizations, procurement may report directly to the CEO or business owner.

Industry and Sector:

The industry in which the organization operates can play a role in determining the reporting structure. For example, in manufacturing companies, procurement might report to the Operations Director or Supply Chain Director due to the direct impact on production and supply chain management.

In service-based industries, procurement may report to the CFO, as financial oversight and cost control are crucial.

Procurement Maturity and Strategic Focus:

The maturity and strategic focus of the procurement function within the organization can influence the reporting structure. If procurement is seen as a strategic function that drives cost savings, supplier management, and value creation, it is more likely to report to senior executives who can align procurement goals with overall business objectives.

Spend Profile:

The spend profile of the organization is another consideration. If the majority of spending is in direct procurement (e.g., raw materials, components), procurement may report to the Operations Director to closely align with production needs. Conversely, if the organization has significant indirect spend (e.g., services, travel), procurement might report to the CFO or another executive responsible for managing overall expenditures.

Organizational Culture and Priorities:

The prevailing culture and priorities within the organization can impact the reporting structure. Some companies prioritize centralized procurement to ensure consistent practices, while others may prefer decentralized procurement to empower individual departments or business units.

CEO and Top-Level Management Involvement:

In some cases, particularly in smaller organizations or when procurement is highly strategic, procurement may report directly to the CEO or business owner. This ensures that procurement receives direct oversight and aligns closely with the organization’s overall strategy.

It’s important to note that there is no universally correct reporting structure for procurement. The optimal arrangement depends on the unique circumstances and strategic goals of the organization. The key is to ensure that procurement has a seat at the decision-making table, aligns with the organization’s objectives, and has the necessary authority and resources to effectively manage procurement activities.

Is Procurement a Good Career?

For individuals considering a career in procurement, Procurement offers a range of opportunities, engaging with suppliers, optimizing relationships, and maximizing value for money are integral to this role. Those interested in pursuing procurement should express their enthusiasm to management, ideally with relevant experience in a related field. Entry points can vary, from transitioning from a related discipline to starting at a more junior level through graduate programs.


In conclusion, procurement and purchasing are distinct yet interconnected functions within an organization. Procurement involves market research, supplier evaluation, and defining requirements, while purchasing focuses on executing the transaction and obtaining the desired products or services.

Category management and supplier relationship management further enhance the procurement process. By understanding these concepts and their relationship to procurement and purchasing, businesses can optimize their procurement strategies, drive cost savings, and ensure value for money.



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