Procurement vs Purchasing: Differences and Similarities

There’s a lot of confusion regarding the difference between procurement vs purchasing. Most professionals still ask: is procurement the same as purchasing? They 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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TL;DR

• Procurement is a strategic, end-to-end process that includes everything from identifying needs to vendor selection, while Purchasing is a transaction-focused subset that involves buying the product or service.
• Both procurement and purchasing require negotiation, market research, and risk management to ensure the buyer gets the best value.
• Procurement is designed for long-term value creation, while Purchasing focuses on short-term transactions and immediate needs.
• Common challenges in both processes include managing supplier risks, ensuring compliance, and staying within budget while maintaining quality.
• CloudEagle.ai streamlines procurement and purchasing processes, improving organizations' efficiency, vendor management, and cost control.

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What Does Procurement Mean?

Procurement is the end-to-end process of acquiring goods or services that an organization needs to function efficiently. It goes beyond simply buying; it’s about strategically managing every step involved in obtaining the right product or service at the right time, price, and quality.

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What are the 7 steps in the Procurement Process?

Here’s a breakdown of the SaaS procurement process:

1. Identify Needs: Understand what your team or department requires, be it products, services, or tools. This step defines the scope and urgency of the purchase.

2. Request Approvals: Internal stakeholders review and approve the request. It ensures the spend aligns with budgets and business priorities.

3. Select Vendors: Research, compare, and evaluate potential suppliers. The goal is to find the best fit in terms of cost, quality, and reliability.

4. Negotiate Contracts: Finalize pricing, terms, and service expectations. This step helps lock in value and minimize risk.

5. Create Purchase Order: A formal PO is issued to the chosen vendor. It confirms the order details and serves as a legal buying document.

6. Receive Goods/Services: Inspect the delivery to confirm it matches the PO. Any issues should be flagged immediately for resolution.

7. Process Payment: Verify the invoice and process payment according to agreed terms. This closes the procurement loop.

Unlike purchasing, which is transactional, procurement is strategic; it focuses on long-term value, risk management, and supplier performance. It plays a key role in cost control, operational efficiency, and overall business success.

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What Is Purchasing?

Purchasing refers to the transactional part of acquiring goods or services. It focuses on the execution, like placing orders, receiving deliveries, verifying goods, processing invoices, and making payments. While it’s often used interchangeably with procurement, purchasing is actually a subset of the broader procurement process.

What are the 7 Steps of the Purchasing Process? 

Here’s what purchasing typically includes:

1. Need Recognition: A department identifies the need for a product or service. This triggers the start of the purchasing process.

2. Requisition Submission: A purchase requisition is created and sent to the purchasing team for review and approval.

3. Vendor Selection: Suppliers are reviewed based on price, quality, and delivery terms. The best option is chosen for the purchase.‍

4. Purchase Order Creation: A purchase order (PO) is issued to the selected vendor. It outlines what’s being bought, pricing, and terms.

5. Order Acknowledgment: The vendor confirms the order and shares delivery timelines. This step ensures alignment before dispatch.‍

6. Goods Receipt: The goods or services are delivered and verified against the PO. Any discrepancies are reported.

7. Invoice Payment: The invoice is matched with the PO and goods receipt. Once validated, payment is processed.

While some businesses shortcut directly to purchasing to save time, skipping the full procurement process can lead to missed savings opportunities, poor supplier performance, or non-compliant contracts. When purchasing is part of a well-defined procurement strategy, organizations gain more control, better pricing, and reduced risk.‍

What are the 7 stages of Procurement and Purchasing (Combined Final Process)? 

Procurement and purchasing follow a step-by-step process to ensure businesses get what they need: on time, at the right price, and with minimal risk. While procurement covers the full cycle from identifying needs to managing vendor relationships, purchasing focuses more on the actual buying phase within that cycle.

Here are the 7 key stages that span both procurement and purchasing:

i) Need Identification: The process begins when a department identifies a requirement whether it’s goods, services, or raw materials. This includes specifying quantity, quality, and delivery expectations.

ii) Supplier Sourcing: Procurement teams research and evaluate potential suppliers based on capability, pricing, lead times, compliance, and reputation.

iii) Supplier Selection & Evaluation: After vetting, the best-fit supplier is selected through quotes, tenders, or RFPs. Evaluation may include scoring vendors on performance, cost, and delivery terms.

iv) Negotiation & Contracting: Both parties agree on pricing, delivery schedules, payment terms, and legal conditions. A formal contract is signed to ensure accountability and risk mitigation.

v) Purchase Order Creation: A purchase order (PO) is generated and sent to the chosen supplier, formally initiating the purchase.

vi) Delivery & Receipt of Goods/Services: The supplier delivers the products or services. The receiving team checks quality and quantity and generates a Goods Receipt Note (GRN) if everything is in order.

vii) Invoice Processing & Payment: Once the invoice is matched with the PO and GRN, payment is approved and released. This stage also includes updating records for audit and reporting purposes.

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What are the Similarities Between Procurement and Purchasing

While there are some significant differences between purchasing vs procurement, 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 or procurement 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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What is the Difference Between Procurement and 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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Procurement Vs Purchasing: How Can They Benefit Your Business?

Both procurement and purchasing contribute to business success, but they serve different goals. Here’s how each one creates value:

How does purchasing help your business?

Purchasing is more tactical and works best for short-term needs. Its benefits include:

• Immediate cost savings through direct negotiations
• Faster processing of goods and services
• Waste reduction by controlling what gets ordered
• Simple workflows ideal for smaller or one-time buys

How does procurement add strategic value?

Procurement takes a long-term view, focusing on planning and relationship-building. It brings:

• Stronger supplier relationships
• Better quality control across vendors
• Improved compliance with internal policies and external regulations
• Increased efficiency through automated workflows
• Shorter lead times with pre-vetted suppliers
• Cost optimization by aligning purchases with business goals

When to use what?

• Choose purchasing when you need speed, simplicity, and short-term fulfillment.
• Go with procurement when planning complex purchases, managing vendors, or aiming for long-term savings and process control.

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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 SaaS security risks and 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 implementing these SaaS security best practices, 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 not knowing the correct way to use the SaaS 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.

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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Procurement and Purchasing: Where Does SaaS Come In?

Procurement versus purchase 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 SaaS 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, streamline approval workflows, and get 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 some raises the app intake procurement request, 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 one customer of CloudEagle.ai saved $450,000 by outsourcing their procurement process. A few stats you can take a look for the same:

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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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Purchase vs Procurement: Final Takeaways

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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FAQs

1. How do you differentiate between purchasing and procurement?

To differentiate between purchasing and procurement, look at the scope: procurement covers strategy, sourcing, and planning; purchasing handles execution, placing orders and processing payments.

2. Which comes first, procurement or purchasing? 

The common difference in procure and purchase is that procurement comes first. It involves identifying needs, selecting vendors, and negotiating contracts. Purchasing follows as the final step, placing the order and processing payment. 

3. Is purchasing and procurement the same?

No. While the terms procure vs purchase are used interchangeably, procurement is broader and more strategic. Purchasing is a subset of procurement, dealing with the actual buying process. 

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