Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

The Procurement Process

As explained, the procurement process is the process of sourcing a product or a service. So for the procurement manager, there is a set of rules and processes that need to be followed in order to build the procurement process.

A typical procurement process is usually divided into the following steps:

1. Sourcing Methodology: Define objectives, secure support, and analyze data to guide sourcing.
2. Market Research: Assess needs, suppliers, and budgets to gather key insights.
3. Request for Information (RFI): Collect data from stakeholders and suppliers to refine requirements.
4. Request for Quotation (RFQ): Request pricing from suppliers and analyze quotes.
5. Negotiation Phase: Secure favorable terms using data-driven strategies.
6. Contracting Phase: Finalize contracts and ensure smooth documentation.
7. Supplier Relationship Management: Build strong partnerships through collaboration and feedback.

The Purchasing Process

To put it simply, purchasing needs. Those products/services do not affect the growth of the company but are rather just needed for its continuous operations.

Does that mean that the procurement manager won’t bother with creating a purchasing process?

The answer is a big no. A procurement manager recognizes the importance of creating a purchasing process since it enables the company to achieve short-term goals that include timing, costs, and quantity.

The typical purchasing process includes the following:

1. Evaluating received RFQs
2. Creating and distributing purchase orders
3. Receiving products/services 
4. Quality assurance of received service/product
5. Receiving a purchase request
6. Arranging payment to suppliers

Procurement and Purchasing: Similar and Yet, So Different

In a procurement team, the terms procurement vs purchasing are often used with just one meaning in mind. Both of the terms are often associated with buying supplies or materials that probably no one cares about defining each term properly. But for a good procurement manager, distinguishing purchasing from procurement is an important skill.

The Procurement and PurchasingDefinition Table

To help procurement managers with setting definitive qualities for procurement and purchasing, we at Procurement Tactics created a simple table for such a need.

More definitions and terms are available for interested procurement managers in our Negotiation Course For Procurement Professionals.

So if we were to create a small and simple table for defining procurement and purchasing, it’d go about something like this:

Examplesof Procurement and Purchasing

Although there are many types of procurement and purchasing, they both have one thing in common: to acquire the best product or services for the best possible price. Here are some examples of how procurement and purchasing are done:

1. Competitive Bidding

This process is where suppliers submit their bids to provide goods and services. Thus, the government or a company chooses the bid that matches their requirements.

2. Sole Sourcing

This process happens when there is only one supplier who can provide for the needs of the company.

3. Open Market 

This happens when a company purchases goods or services from the open market without any restriction to suppliers who can provide for its needs.

4. Request For Proposal (RFP)

This document is issued when a company or the government wants to purchase goods or services but there are many suppliers who can provide for their needs.

Thus, the suppliers submit their proposals, and the company or the government will choose the proposal that matches their requirements.

5. Reverse auction

In this process, suppliers compete against each other to offer the lowest price for their goods and services. The company will choose the supplier who has the lowest price.

Conclusion

Just like we discussed earlier, procurement is about finding and getting things a company needs, like products or services. On the other hand, purchasing is a smaller part of this, where you actually buy the stuff.

So, procurement is like the big plan for managing everything the company needs, while purchasing is about getting those specific things.

Now that you get the difference between procurement and purchasing, we hope it’s clearer for you to see how they each play their own important role in making sure a company has what it needs.