People often mistake purchasing for procurement and vice versa or use the terms interchangeably. These are, however, quite distinct operations. Purchasing, in a nutshell, is the final stage of simply ordering goods. Procurement, on the other hand, is made up of many steps before and after purchasing, including research, sourcing, negotiating, supply chain management, transport & logistics, budgeting, project management and installation.

If you think of purchasing as a one-step process – similar to clicking ‘Buy Now’ online, then procurement is the precursor to purchasing and the mechanism that gets the products to site.

Procurement operates with a specific, focused scope. It zeroes in on the individual processes of selecting suppliers, negotiating contracts, and purchasing the goods and services that organizations require. The procurement process is often seen as a subset of the larger supply chain management system, but it holds its own in terms of strategic importance by:

• Identifying needs

• Sourcing materials and services

• Negotiating prices and terms

• Making purchases

• Ensuring the quality and compliance of the acquired goods and services

The procurement process ends once the goods or services are delivered and paid for, underscoring its targeted nature.

Supply chain management, in contrast, has an expansive, end-to-end scope that encompasses the entire lifecycle of a product—from raw materials to production, from distribution to the final delivery to the consumer. SCM seeks to manage and optimize this entire process by:

• Integrating procurement processes

• Overseeing the transformation of raw materials into final products

• Managing logistics and distribution channels

• Coordinating with suppliers, manufacturers, and retailers

• Ensuring the satisfaction of end consumers through efficient delivery

By taking a holistic view, SCM aims to create a seamless and efficient flow of goods and services across the entire value chain. This broad scope not only includes the procurement’s tasks but also extends to maintaining the balance between supply and demand, optimizing logistics, and minimizing costs through strategic supply chain planning and execution.

In essence, while procurement is focused on the tactical acquisition of necessary resources, SCM embodies a strategic orchestration of all activities from supplier to customer, ensuring a competitive and agile operation. This distinction in scope is a primary differentiator between the two fields and is crucial for businesses to understand in order to leverage each area effectively.