,1 PROCUREMENT MANAGEMENT
1.1 PROCUREMENT VS PURCHASING
▪ Both Procurement & Purchasing often used.
▪ Interaction -> What is difference ? Other Terms ?
o Procurement: bigger umbrella, more strategic aspects, where to buy?
o Purchasing: operational cycle of buying something, companies do this every day
The Purchasing Process Model
▪ Sourcing & Supply : mostly used in production environment
▪ Buying : mostly used in retail
▪ Purchasing : mostly associated with the Operational activities
Procurement vs. Purchasing
▪ Procurement
o Broader context incl the stategical elements, incl
Sourcing, incl supplier mgt
o “the process of finding and acquiring all of the goods, services, and works an
organization needs to operate and fulfill its business model”
o Activities include
▪ Identify goods and services required
▪ Approve purchase requests
▪ Procurement
▪ Identify suppliers
▪ Sending inquiries (RFQs and RFPs)
▪ Receipt of quotes from suppliers
▪ Negotiate pricing and terms
▪ Select vendors
, Purchasing
• Focus on the Operational activities
• “set of tasks involved in buying goods and services. Purchasing involves tasks such as
ordering, raising purchase orders, receiving, and arranging payment”
• Activities include
• Acknowledge purchase orders
• Advance shipment notice
• Receive goods
• Inventory management
• Invoice recording
• Three-way match
• Payment to supplier
!! Terms “Procurement” & “Purchasing” often used interchangeably..but they are different !!
Purchasing is part of the bigger umbrella of procurement
SAP: creates purchase order for customer (quantity, price, etc.), generated via the ERP system SAP,
then forwarded to supplier A via SAP
Next: goods delivery and invoice via the SAP system
Next: cash receipt (only pay once you receive the invoice)
Procurement covers different aspects :
• strategic elements (single supplier vs multi supplier)
• Operational (…steps to buy )
• Technology (e Procurement)
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