The Difference between Procurement and Purchasing
May 20, 2025 by Medigroup
There are a lot of terms used in the business world that sound a lot alike, you know. Consider the terms “procurement” and “purchasing,” for example. They both involve obtaining items for business, right? What’s the big deal, then? Are they simply different terms for the same thing? To be honest, even though they are undoubtedly related, assuming that they are interchangeable would be like claiming that baking a cake and simply purchasing one from the store are the same thing. Not quite, but close.
Knowing the subtle but important difference between procurement and purchasing can give you a significant advantage, regardless of your business area and experience.
Purchasing: The Tactical Part of the Chain
Let’s start with “What is purchasing?” Let’s begin by asking, “What is purchasing?” The transactional function of purchasing goods and services is the most basic definition of purchasing. Orders, invoices, and payments are all involved. It’s undoubtedly an important step in the process, but its main focus is on the transaction’s effective execution and immediate need.
Consider yourself in charge of a small office when you discover that you are running low on printer paper. Usually, after receiving a request, the purchasing department (or whoever is in charge of this) would locate a supplier, place an order, get the paper, and pay for it. That is the act of purchasing. It’s usually a routine, operational task with a focus on cost-effectiveness and efficiency for that particular transaction.
Procurement: Combination of Planning and Strategy
And the next step is answering, “What is procurement?” As said earlier, purchasing is only one aspect of procurement, which is a complex and strategic process. It includes identifying the needs of the company, finding potential suppliers, negotiating contracts, maintaining relationships with them, making sure that ethical codes are followed, and even risk management. It covers the full cycle of acquiring products and services.
Think back to our office example. Before the purchasing department even thinks about ordering paper, the procurement team might have been involved in a range of linked processes:
- It’s possible that they looked at usage patterns and predicted the need for additional paper.
- They may have looked into a variety of paper suppliers, taking into account aspects like cost, dependability, sustainability, and quality.
- To secure better prices and guarantee a consistent supply, they may have negotiated a long-term contract with a supplier.
- They would then monitor the supplier’s performance, ensuring they are meeting the agreed-upon terms and quality standards.
We call this entire set of actions—from determining the need to managing the supplier—the “procurement process.” Compared to purchasing, this approach is significantly more complex and strategic.
The Million-Dollar Question: What’s the Real Difference?
The main difference, to be honest, comes down to strategy and scope. Think about it this way: purchasing is a particular task that is part of the larger procurement process. The act of actually purchasing goods or services is what purchasing is all about. On the other hand, procurement is a more in-depth process that covers everything from determining the need for something to actually obtaining it and even maintaining the supplier relationship afterward. Can you see the difference? It is similar to planning a trip versus just buying a train ticket.
The Procurement Process: A Step-by-Step Look
To really nail this down, let’s briefly look at the typical stages involved in the procurement process:
1. Identifying the Need: Recognizing what goods or services are required by the organization.
2. Sourcing: Researching and identifying potential suppliers who can meet those needs.
3. Negotiation: Discussing terms, pricing, and contracts with potential suppliers.
4. Purchasing: Placing the actual order with the chosen supplier. This is where the purchasing function comes in.
5. Receiving and Inspection: Ensuring the delivered goods or services meet the agreed-upon specifications.
6. Payment: Processing invoices and paying the supplier.
7. Supplier Relationship Management: Monitoring supplier performance, addressing any issues, and building a positive long-term relationship.
As you can see, purchasing is just one step within this larger “procurement process.”
The Purchasing Process in Action:
Just to round things out, the “purchasing process” typically looks something like this:
1. Purchase Requisition: An internal request from a department needing goods or services.
2. Purchase Order: A formal document sent to a supplier to place an order.
3. Supplier Confirmation: The supplier acknowledges the order.
4. Goods Receipt: The ordered items are received and inspected.
5. Invoice Processing: The supplier sends an invoice for payment.
6. Payment: The company pays the supplier according to the agreed-upon terms.
It’s a more linear and transactional process focused on getting a specific need met.
Why Does This Difference Even Matter?
You might be asking yourself, “Okay, I get it, one’s broader than the other, but why should I care?” It is important to fully understand this difference and not spend time looking for minor details. Businesses can save a significant amount of money, enhance quality, build closer bonds with suppliers, and—above all—reduce risks by using a strategic approach to procurement. It involves having an open mind and making thoughtful decisions that will eventually be beneficial to the company.
Professionals are more familiar with various roles and responsibilities within an organization by being aware of the specifics and responsibilities of their respective roles. While someone in procurement might be involved in creating sourcing strategies and negotiating contracts, someone in purchasing might be concentrated on processing orders quickly and smoothly.
Final Thoughts:
We hope now the situation with purchasing and procurement is clearer. Despite their frequent usage together in casual conversation, the terms “procurement” and “purchasing” have unique meanings. Yes, there might be some overlap, especially in smaller companies. Sometimes, a single individual or small team may be in charge of both the strategic and transactional aspects of obtaining products or services. However, as organizations grow and become more complex, these roles typically become more specialized.
The fundamental distinction between procurement and purchasing must be understood by everyone involved in the supply chain. It’s a basic concept that keeps companies operating smoothly and effectively. Getting what you need is crucial, but so is getting it at the right price, in the right way, and at the right time.
With nearly 25 years of experience, MediGroup leads the industry in focused group purchasing, offering modern cost-saving solutions and expertise to physician practices, surgery centers, and non-acute care facilities. Our passion for contract negotiation provides competitive pricing and flexibility, saving time and money while improving operational efficiency. Join us to optimize your purchasing power and patient care process.
Location: Chesterfield, MO
Areas of expertise: Contract negotiation, cost-saving solutions for medical facilities, building connections between practices, supply chain management.
