Procurement vs Purchasing: Differences and Similarities

There’s a lot of confusion regarding the difference between procurement vs purchasing. Most professionals believe they are the same, but they don’t realize that their functions differ from each other.

Wait, the end result is purchasing a product, right? So, isn’t procurement the same as purchasing? If you’re wondering the same thing, this article is what you need. 

Procurement and purchasing are essential to running seamless business operations. The process has come a long way, with a single procurement software now handling the entire purchasing process for enterprises.

However, one should understand the difference between procurement and purchasing to effectively manage and streamline it.

So, let’s explore procurement vs purchasing by understanding their definitions, key differences, and how they overlap.

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1. What Does Procurement Mean?

Procurement refers to the entire process of acquiring products or services. It involves requirement analysis, vendor research, vendor selection, negotiation, contract signing, and purchase.

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The goal of procurement is to obtain the best possible price and terms while still meeting the quality and quantity requirements of the buyer. To achieve this goal, procurement must be strategic and data-driven.

Procurement definitions concur that procuring organizations must clearly understand their needs, objectives, risks, and potential suppliers before negotiations begin. Furthermore, they must be prepared to leverage data throughout the process to make informed decisions.

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2. What Is Purchasing?

Purchasing is the act of buying products or services. It is more like a subset of the procurement process. It involves receiving products, verifying purchases, sending GRN, creating invoices, etc.

Some organizations skip the entire procurement process and go straight to purchasing to save time. While this approach may work for some buyers, it does not always provide the best price or terms.

Therefore, buyers must understand the importance of going through the meticulous procurement process before purchasing the product.

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3. Procurement vs Purchasing: The Similarities

While there are some significant differences between procurement vs purchasing, there are also some similarities. Here are some similarities in purchasing vs. procurement

a. Both Involve Negotiation: One similarity between these concepts is that both involve negotiation to get the best possible price and terms for the buyer while ensuring quality and timely delivery.

b. Both Require Research: Another similarity is that both require market research and supplier selection to identify potential suppliers who can provide what you need at a fair price.

c. Both Have Risks: Procurement vs purchasing involves risks such as supplier default or poor-quality products/services. Considering all risks before moving forward with any purchase decision is essential.

d. Similar Result: Even though the steps vary for each process, the result is still the same: purchasing a product for the team.

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4. The Difference: Procurement vs Purchasing?

Now that we’ve defined each concept individually and understood their similarities, let’s look at how they differ. The primary difference between procurement and purchasing is the purpose, followed by the ideas of timing and approach.

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5. Procurement Vs Purchasing: How Can They Benefit Your Business?

Procurement fulfills existing needs and helps ensure that an organization gets the best possible value for its money when acquiring goods and services. Similarly, purchasing ensures that an organization gets the best possible value for its money in addition to negotiating favorable contracts and eliminating waste.  

While purchasing delivers cost savings, procurement offers many benefits, like improving quality control, managing supplier relationships, reducing lead times, increasing process efficiency, and enhancing compliance.

If your goals are short-term, then proceed with the straightforward purchasing process. You need a well-defined procurement process to plan your purchases meticulously to achieve long-term goals.

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6. Challenges of Procurement Vs Purchasing

Purchasing and procurement are vital yet challenging for any organization. From vendor selection to budget management, here are the top challenges and how to tackle them:

A. Managing Risks

The biggest challenge in procurement and purchasing is managing the risks associated with third-party vendors and suppliers.

When working with suppliers, you must guard against supplier risks (such as financial instability or poor quality control), legal risks (such as non-compliance with regulations), and reputational risks (such as being associated with unethical suppliers).

Your risk management process should include conducting reference and background checks on individuals and companies.

Additionally, ensure you clearly understand the terms of your agreement so you know what to expect from your supplier. Finally, establish procedures for addressing quality issues or other problems in your relationship.

By taking these steps, you can minimize the risk associated with working with suppliers and ensure that your organization gets the products and services it needs without experiencing significant problems.

B. Staying Within Budget

The second most significant challenge procurement and purchasing professionals face is staying within budget.

With the ever-increasing cost of goods and services, finding ways to cut costs without sacrificing quality can be challenging. However, you can use a few strategies to help keep your spending in check.

First, take advantage of technology. Several e-procurement and e-purchasing platforms can help you track spending, compare prices, and find new suppliers.

Additionally, many suppliers offer online discounts or coupons you can take advantage of. Utilizing these tools can help you save money without compromising on quality.

C. Managing Supplier Relationships

One final challenge in procurement and purchasing is managing vendor relationships. Given the importance of these relationships to your operation, they must be managed effectively.

This starts with having clear expectations for each supplier and maintaining open communication channels to address problems quickly and efficiently.

Additionally, ensure you have a process for dealing with changes in supplier contracts or pricing structures—this will help avoid disruptions in your supply chain.

Finally, regular review meetings with each supplier can help ensure everyone is on the same page, fulfillment is being made according to schedule, and any potential concerns can be identified early on and addressed before they become significant problems.

7. How Can E-Procurement Solutions Help Your Business?

In today’s digital world, time is money, making efficient procurement and purchasing processes necessary. With the right e-procurement solution in place, organizations can streamline their procurement versus purchasing processes, saving time and money.

Here’s a look at how e-purchasing and e-procurement solutions work.

• Creating and issuing purchase orders
• Managing supplier contracts
• Tracking product/service deliveries
• Processing and timely payment of invoices
• Generating insightful, visual-rich reports
• Keeping track of spend and available budget
• Identifying and highlighting dark purchasing.

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8. Procurement Vs Purchasing: Where Does SaaS Come In?

Procurement vs. purchasing also applies to SaaS apps. Organizations often use over 250apps for smooth operations. Some follow a clear procurement process to buy these apps, while others skip it.

The challenge arises when companies need to buy many SaaS apps. To do this, procurement teams need reliable SaaS procurement software. CloudEagle.ai simplifies the process of buying and managing SaaS apps for organizations worldwide.

Here’s how it can benefit you:

A. Unified SaaS Vendor Management

CloudEagle.ai simplifies SaaS vendor management by bringing everything into one platform. You can track pricing, contracts, usage, and vendor performance all in one place. It helps companies streamline procurement, avoid duplicate apps, and ensure they choose the right apps.

B. Workflows for Intake-to-Procure

CloudEagle.ai automates the entire intake-to-procure workflow, making it easier for teams to submit requests for new SaaS apps, evaluate them, and move through the procurement process.

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From the initial request to the final purchase, the platform ensures that all steps are streamlined and tracked in real time. This helps reduce bottlenecks, ensures approvals are processed on time, and eliminates manual work associated with procurement.

Discover how RingCentral consolidated SaaS management and procurement with CloudEagle.

C. Custom Procurement Request Forms

CloudEagle.ai allows organizations to create custom procurement request forms that are tailored to their specific needs. These forms capture the necessary information for each software purchase request, such as the purpose of the tool, pricing details, required features, and more.

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This customization ensures that procurement teams have all the data they need to evaluate and approve requests more efficiently, eliminating errors and speeding up the decision-making process.

D. Visibility for All Stakeholders

With CloudEagle.ai, all teams, including procurement, IT, finance, and others, can track the procurement process. Everyone can view requests, approval workflows, and details about the SaaS tools being considered. This transparency improves collaboration and prevents delays.

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E. Get Approvals Faster with Slack

CloudEagle.ai integrates with collaboration tools like Slack to speed up the approval process. When a procurement request is raised, notifications are automatically sent to the right stakeholders via Slack. Approvers can quickly review, comment, and approve or reject requests directly in Slack, cutting down approval time and preventing delays.

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F. Outsourced Procurement

CloudEagle.ai makes outsourced procurement easier by letting organizations manage third-party services directly on the platform. This reduces the effort involved in dealing with external vendors and teams. By automating the process and working with trusted providers, organizations can secure the best prices and terms without manual effort.

Check out how our customer saved $450,000 by outsourcing their procurement process to CloudEagle →

G. Improved Vendor Negotiation

CloudEagle.ai improves vendor negotiations by giving insights into pricing history, contract terms, and vendor performance. This helps procurement teams secure better deals and favorable terms. With price benchmarking insights, organizations can spot cost-saving opportunities and negotiate more effectively.

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See how Nowports secured 34% savings through CloudEagle’s effective negotiation.

H. Vendor Performance Monitoring

CloudEagle.ai tracks vendor performance over time, monitoring metrics like usage, service levels, uptime, and support. This helps organizations ensure they are getting the expected value from their vendors and provides data for decision-making when renewing contracts or selecting new vendors.

I. Seamless Integrations with Business Tools

CloudEagle.ai seamlessly integrates with over 500 systems, like finance, procurement, and asset management systems, making it easier for departments to share data. This helps teams like finance and IT work more efficiently, without manual data entry, and ensures everything runs smoothly and accurately.

J. SaaS Compliance and Security Assurance

CloudEagle.ai helps organizations stay compliant with industry regulations like ISO 27001, SOC 2 Type II, GDPR, and others by tracking software contracts, subscription terms, and security requirements. It also checks vendors' security standards, ensuring that organizations only purchase software that meets security and compliance rules.

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Eric Silver emphasized how CloudEagle’s insights bridged the gap between procurement and purchasing. Procurement, which focuses on long-term strategy, was enhanced with data from CloudEagle, while purchasing efficiency was improved through smarter license management

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10. Conclusion

Purchasing and procurement are connected, but they focus on different things. Purchasing is about buying the right products at the right price and time. It’s a daily task that deals with placing orders and making payments.

Procurement is a broader process. It includes finding suppliers, negotiating contracts, and making sure the deals support long-term goals. Purchasing is just one part of procurement, including managing vendor relationships and strategy.

Procurement solutions like CloudEagle.ai streamline your procurement process by automating critical procurement tasks and procedures from the vendor selection phase to the point at which a purchase order is generated. By doing so, CloudEagle.ai saves organizations time and money.

Schedule a demo with CloudEagle.ai to simplify and streamline your procurement process.

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