“Purchasing is the procedural aspects that are related to competitive processes and the methods employed to actually buy equipment, products and services” (Purchasing Insight.com, 2017)
Procurement Functions
Procurement is the process of obtaining all the goods and services required by an organisation from external sources. It involves committing large amounts of the organisation’s money to spend on obtaining all these external requirements. In manufacturing organisations, procurement is needed to obtain the manufacturing infrastructure and the materials, components and other requirements of the production process. Alternatively, in service organisations, procurement is needed to obtain support services delivered by specialist contractors, such as equipment maintenance. To achieve these objectives, the key focus for procurement is the external supply market as a result of identifying and using suppliers who are cost-effective and efficient.
The terms procurement and purchasing are often used interchangeably, whilst the distinction may not be important for those who do not work directly within or have any responsibility for procurement and purchasing, to use them with a similar meaning is actually incorrect. Procurement is an overarching function describing the activities and processes that are used to acquire goods and services. Procurement is the grouping of all the processes that relate to the acquisition of goods and/or services for an organisation. Procurement thus encompasses a range of different activities and processes involved in establishing basic business requirements, activities to source appropriate materials and services (such as market research) and includes contract negotiation and vendor evaluation processes. It also includes, but is not limited to, the purchasing activities carried out to order and receive goods for the business.