Mistaking procurement for purchasing is common, while the two functions are distinct. You understand them better by focusing on what these two functions involve, who handles these, and what they achieve through these processes. A layperson may not bother about this, but a business owner needs to know these aspects well, as procurement refers to an entire cycle of finding a product, selecting, and buying it through a vendor. They can help you with direct purchase, bidding, or tender filing while handling quality, quantity, and delivery. So you can enlist different tasks under this, such as market survey, identifying suitable suppliers, shortlisting vendors, understanding the company’s requirements, taking quotations and negotiating the price, analyzing quality, managing contracts, invoicing, and maintaining the relationship with a supplier.
On the other hand, purchasing refers to buying goods and services. It is that part of the procurement cycle which focuses on ordering, speeding up delivery, receiving goods, and settling the bill.
Procurement and Purchasing
These two processes help organizations acquire goods and services through a distinctive method. In procurement, all activities focus on the acquisition of products. However, the purchasing process is all about buying them. Procurement is an entire business lifecycle that starts before the purchase happens and continues even after the organization has bought goods. While procurement has more relevance in a production environment, purchasing is more suitable for wholesale. A procurement agent will pay more attention to the product’s value. But price remains the main focus in purchasing.Procurement is more about a long-term relationship than purchasing which attaches more weight to transactions.
If you want help with procurement, you get two options – distributor vs supplier. Again, you need to understand their value addition to determine what your business needs most at this stage.
A sourcing agent or a distributor
Both have their place in this critical business cycle, but one can be more valuable than the other in certain situations. For instance, if you want to purchase ready made products for quick delivery, a distributor can do it. But specific needs like customization make suppliers or sourcing agents a key element. Distributors can give you options for a few products by brand. You go through the list and select from them. Sourcing agents can introduce you to many manufacturing units to help you make your product. They have to secure your approval before doing anything. If you want to change something in a product, you can also do that.
To be precise, you can rely on them to ask manufacturers to create prototypes so that you can analyze the outcome and give thumbs up for order placement.Distributors deal in finished items. So, customization and prototyping will be out of the question. You cannot expect them to take care of quality control, whereas sourcing agents specialize in this.
So, who do you need for procurement? The experts say that it all depends on the requirement for quantity. Distributors can be good points of contact to process smaller orders. With suppliers or sourcing agents, you can fulfill large volumes. However, give them some time before they ship your items.