Marie Jeannie Buna Intal

DEFINITION OF PURCHASING AND PROCUREMENT

Procurement
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
organization. Procurement is, essentially, the overarching or umbrella term within which
purchasing can be found.
Procurement is the process of finding, agreeing terms, and acquiring goods, services, or works
from an external source, often via a tendering or competitive bidding process. The process is
used to ensure the buyer receives goods, services, or works at the best possible price, when
aspects such as quality, quantity, time, and location are compared.[1] Corporations and public
bodies often define processes intended to promote fair and open competition for their business
while minimizing risk, such as exposure to fraud and collusion.
Purchasing
Purchasing is a simple transaction, when companies pay for and receive goods or services. For
a small business with no procurement department, this may mean a phone call to an office
supply store when the supply of pens runs low or a new computer is needed. Small businesses
often lack the purchasing power of a major enterprise and have no leverage with which to
negotiate.
Purchasing is the act of buying the goods and services that a company needs to operate and/or
manufacture products.
Many people are ignorant of what purchasing is all about. “Purchasing” is the term used in
industries, commerce, public corporations to denote the act of and the financial responsibility for
procuring material, supplies and services. It simply describes the process of buying. However in
a broader sense, the term involves determining the needs, selecting the supplier, arriving at a
proper price, terms and conditions, issuing the contract or order, and following up to ensure
proper delivery. It focus is to purchase or obtain materials in the right quantity, in the right
quality, at the right price, at the right time, and from the right supplier and delivering to the right
place.

THE DEVELOPMENT OF PROCUREMENT

PROCUREMENT AND THE PYRAMIDS

The first traces of procurement can be seen throughout ancient history, including the Egyptians in 3,000
BC. Though there was no designated procurement function, materials management aided in the building
of the pyramids. The Egyptians used scribes to manage the supply for these massive projects. Scribes
played a clerical role, recording the amounts of materials and workers needed on papyrus rolls. These
scribes would track orders through fulfillment and were one of the first known in history to be in the
procurement profession.

PROCUREMENT SHIFTS AGAIN

Unfortunately, the World Wars forced procurement initiatives to shift back away from a strategic role to
strictly clerical. Due to the scarcity of materials during war, procurement revolved heavily around order
placement. During wartime and the depression, the objective was to obtain enough raw materials,
services, and supplies to simply keep the economy running.

It was not until the mid-1960s that procurement once again took on managerial role, on a wide-scale. The
concept of material management became the focus during this period. Procurement professionals
emphasized competitive bidding, with price becoming the determining factor for most contracts. An
increase in trained professionals during this time period helped procurement on its way to regaining
departmental status.

The 1980s saw a significant increase in supplier competition. This gave organizations the luxury of putting
more focus on supplier quality and dependability. Supplier management became an important factor in
procurement and remains so today. By the late 1990s, the role of procurement had begun its transition
into strategic sourcing. Procurement officials looked at supplier as partners and long-term contracts were
encouraged. This was the beginning of procurement’s modern day evolution.

PROCUREMENT TODAY AND INTO THE FUTURE

Today, procurement professionals are instrumental to the success of organizations. They’re responsible
for an umbrella of initiatives from the development of a solicitation to the evaluation of and working with
qualified suppliers, and everything in between. Ultimately, procurement is having a significant impact on
an organization’s bottom line – solidifying its spot at the management roundtable. In the 1960’s a CPO
(Chief Procurement Officer) was unheard of; today, more and more procurement heads are helping their
organization develop and reach strategic and operational goals.

New technologies continue to evolve procurement. E-procurement solutions, like SourceSuite, are
creating a more efficient approach to strategic sourcing. With the shift towards strategic sourcing, e-
procurement bid and vendor management software save the organization time so that it can focus on
organization initiatives and supplier relationships. SourceSuite’s cloud-based bid and supplier
management platforms configure to meet the purchasing needs of virtually any organization. Currently,
SourceSuite streamlines the purchasing process for over 900 buying organizations across the country.

Though procurement has a long history, its role as a strategic part of the organizational structure is still
relatively new. Procurement’s quick evolution through the last 30 years can be credited to many of the
professionals we are celebrating this month. In the years to come, it can be expected that the
procurement function will only continue to develop and expand its ability to directly impact successful
organizations.