What’s the difference between Procurement and Purchasing?
Many people use the terms purchasing and procurement interchangeably, but despite their similarities they do have different meanings. Let’s clarify any confusion on the difference between procurement and purchasing.
Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts and actual purchasing of goods. Procurement is concerned with acquiring [procuring] all of the goods, services and work that is vital to an organisation.
Procurement is, essentially, the overarching or umbrella term within which purchasing can be found.
Procurement deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of importance to an organisation. Purchasing is the process of how goods and services are ordered.
It’s often been said that SMEs don’t take procuring goods and services seriously enough, or really consider the many issues that poor procurement can cause across the business or organisation.
Particularly in times of recession or economic uncertainty, when market confidence is low and consumer activity remains slow, directors of smaller companies and organisations need to be thinking about more than just their core business activities in order to survive.
This can be a real challenge within a smaller business, where there is often a misconception that an exceptional product or service offering, cleverly marketed, will be enough to succeed. In reality, it’s usually the more mundane things behind a great idea which ensure business survival – an excellent business model, sustained cash flow, and effective procurement.
Sourcing the best procurement deals sounds like a straightforward concept – but the reality is that many SMEs and smaller organisations fail to make the link between a shrewd procurement strategy and building the best possible base for growth. They tend also not to be very good at it!
However, excellent supplier relations, a coherent procurement strategy, and a culture of smarter spending, are the foundations of running a tight ship and enabling your business or organisation to not only survive challenging periods but to grow through them.
It’s commonly assumed that the savings incurred by sharpening procurement practices will be marginal.
This couldn’t be further from the truth.
In fact, a SME with, say, a £5M turnover could be looking at savings of around 20-30% which, in context, is a very significant amount.
What We Do
Identifying and implementing improvements in procurement practices and the resulting opportunities for cost reduction are our key areas of focus.
Our team includes individuals with experience gained during long careers at a senior level in their areas, and we use this experience to advise businesses and organisations on how to get the best deals from suppliers.
The first thing we do is to listen to you. Our aim is to get a good understanding of your business and your priorities.
We then work with you to deliver against your objectives. In practice, this could mean reducing cost. It could mean consolidating suppliers or reducing supply chain time. It could mean generating cash to help your business fund growth.
Reducing the cost of doing business saves money; it makes your business more competitive, boosts profit and generates cash.
We can review, challenge, and address the costs within your business to bring sustainable, measurable cost reduction and process improvements.
We can help you to:
- Improve internal processes
- Improve supplier relationships
- Benchmark prices
- Negotiate lower prices/improved trading terms
- Conduct tendering exercises [where applicable]
- Onboard new suppliers
If preferred, we can then remain engaged for the longer term, conducting regular invoice audits and supplier performance analysis, etc. This ensures that we are able to maximise the savings identified, and keep your costs lower for longer.
In some cases, by prior arrangement, when undertaking this type of assignment we may be able to work for a lower fee and share an agreed percentage of the resulting cost savings.
We have particular experience of procurement in these sectors:
- Print & Copy
- Office Products
- Mailings & Courier costs
- Premises/Facilities Management
- IT Support
- Utilities [electricity and gas]
- Vehicle Fleet
- Merchant Services
- Cleaning Products
- Hot/Cold Beverage supply
Please contact us to find out more about how we can help you to improve your procurement processes and – potentially – save up to 30% of your existing non-core expenditure [excluding salary and associated costs].