For every procurement professionals working in this department, one of the challenges they find is to understand the correct terminology. This is because the terminologies sound the same even though they are different to one another. For example; purchasing and procurement is a term based on buying however, the difference exists. This leads to a lot of confusion. Let’s focus on the differences between procurement, purchasing and sourcing.
- Procurement –It is the term used for purchasing goods and services for a business. The term procurement is used for the identification of different activities such as identifying the goods or services and more. Procurement based activities include selecting a vendor, negotiate different contracts, coming to agreement related to payment, analyze etc. Therefore, procurement is the bigger brother to purchase.
- Purchase – The term purchase is a part of procurement where both define the meaning of purchase. Both terms may sound similar but there are differences between 2. Buying or selling of goods or services which in turn acts as a part of transaction-oriented while purchasing is only about make and receive payments.
- Sourcing – Procurement requires good source of purchasing goods and services. As mentioned above that procurement is about buying goods and services on behalf of a company, souring is all about finding the best and genuine vendors and suppliers for the goods. Therefore, sourcing is a sub-part of procurement.
These are the differences between procurement, purchasing and sourcing. However, doing contracts and procurement courses will allow you to learn more in-depth information on these 3 popular terms.