Difference Between Procurement And Purchasing You Should Know

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A glimpse between procurement and purchasing has almost the same scope of work, so many people end up misinterpreting and interpreting it. Procurement and purchasing, although it has some similarities, but are very different fields.

These differences can be based on the scope of their work. Procurement has a working scope that includes Purchasing, Expediting, and Traffic.

Purchasing

Purchasing has the scope of purchasing goods where the purchasing buys the goods by requesting an offer from the vendor, then negotiating, and finally making the order of the goods. After that the purchasing task is complete.

The principle that should be considered by a purchasing is budget, therefore a purchasing must know the budget or price range of the goods to be purchased so that later can negotiate the price of the goods well and get a competitive price.

By understanding a little explanation above, can be concluded that the scope of work Procurement is more widespread if compared with purchasing. We can also conclude that purchasing in principle is in the scope of Procurement.

What Is Expediting?

Expediting is tasked with monitoring and ensuring the specifications, quantity, description, and matters relating to the PO (purchase order) under the contract of the employment agreement. So the Expediter task starts at the time the PO is made until the material to the site or in the warehouse.

A good expeditor should be able to do weekly reports on material status. An expeditor will often be associated with a vendor because it must know the status of the material in the message.

What Is Traffic?

Duty to coordinate with the forwarder (Transportation service provider) to carry out material delivery to the site. The task of traffic is to make deliveries and ensure that secured goods are shipped to the site or in the warehouse.

Based on the purpose of consumption or use of goods and services, goods procurement activities or procurement can be divided into 2 categories:

1. Direct procurement

Direct procurement is a purchase of raw materials or finished goods that directly affect the operational activities and sustainability of the production process. The costs incurred for purchasing this type include large and routine done.

For example, eg purchase the Snapdragon processor by Samsung for the production needs of its smartphones or purchase fresh fruit bunches from farmers by palm oil mills to be processed into Crude Palm Oil.

2. Indirect Procurement

It is procurement or purchase that does not directly affect the operational activities of the company. The fees incurred for making this type of purchase are relatively smaller and not carried out routinely.

Procurement of this type can be done in a planned or based on specific needs only. such as the procurement of periodic service services production machines, the purchase of spare parts, to the purchase of office stationery.

Procurement Cycle

In the procurement world, several cycles must be spent, such as:

a. Requirement Determination

Determining the needs of goods or services to be purchased based on the needs of the company or organization following the guidelines request goods or SOP of each department.

b. Source Determination

That is the process of finding an individual or company provider of goods or services appropriately. The procurement party can send an inquiry document or price document to the provider of the goods or services.

c. Vendor Selection

That is the process of finding the right supplier. The procurement party negotiated the suppliers and reached an agreement with the supplier.

d. Order Processing

That is the process of request for goods or services, in this stage, the procurement will issue a Purchase Order documents that have been notarized and legal to be given to the supplier, as a basis for production and delivery.

e. Purchase Order Monitoring

The procurement party must continue to monitor the progress of orders and tracking orders.

f. Goods Receipt

Receipt of goods or services by the supplier following the PO documents that have been shipped before.

g. Payment

That is the process of receiving and input of billing data from the vendor, to be forwarded to the financial and payment section is made following the agreement that has been signed.

That's the article about the difference between procurement and purchasing, hopefully, this article will useful and can increase your knowledge.