Well, I asked David Riddle one of our purchasing management experts, exactly that question! I hope his answer helps you.
What is Purchasing? Are purchasing and procurement the same things? Or are they different and, if so, how?
That’s a great question, because they are different; however, there is confusion in many people’s minds about what they refer to. Let’s start with purchasing. It’s a transaction: you buy an item or a service.
In purchasing, you also monitor the satisfactory delivery of whatever you bought and you verify that all the administrative work has also been done correctly. The purchasing transaction is then one part of an overall process that we call procurement.
Besides purchasing, procurement also covers the initial planning and the definition of the product or service specifications for what you want to purchase, the search for appropriate suppliers, value analysis and the terms and conditions of supplier contracts.
Value analysis is the comparison of suppliers, to see what benefits each one can bring to your organisation and to rank suppliers accordingly. The terms and conditions of supplier contracts need to be defined in a way that best serves your business, but also in a way that makes working to that contract sustainable for the supplier. When those activities have been accomplished, the purchasing transaction is the one that completes that end to end process.
What does a purchasing manager do?
In the same way that buyers can be different, so can purchasing managers and their roles. For a smaller company, the purchasing manager may be directly responsible for purchasing all of the goods and services that the company needs.
This might include anything from stationery, electricity and telephone services, through to raw materials for a product that the company manufactures. In a larger company, the purchasing manager may run a team of purchasing clerks or operators who do the purchasing according to the category or the product type. The purchasing manager’s role may then be to ensure optimal working conditions and corresponding excellence in the results, using management tools such as KPIs (key performance indicators) to measure how well the team is performing within the organisation.
David Riddle is a contributing Author to the Supply Chain Secrets Book Series.