Distinction Between Purchasing And Buying In Organizations

distinction between purchasing and buying in organizational procurement processes

When considering procurement activities within an organization, it is crucial to distinguish between the terms 'purchasing' and 'buying,' as they refer to different processes with varying levels of formality and scope. Purchasing is a structured, formal process that involves specific steps aimed at acquiring goods and services for organizational use, often requiring contracts and detailed negotiations (Benton, 2014). Conversely, buying is generally an informal activity relating to the procurement of everyday goods or services, often handled on a more spontaneous basis.

The typical purchasing cycle is a systematic sequence of actions: identifying the need, specifying quantity and timing, drafting purchase orders, obtaining financial approvals, researching suppliers, selecting a supplier, establishing pricing and terms, placing the order, receiving the goods or services, approving payments, and updating inventory records (Purchasing & Procurement Center, n.d). This comprehensive approach ensures accountability, cost control, and alignment with organizational policies. For example, in a recent procurement process, a company conducted an RFP to select a vendor for relocation services. The process involved needs assessment, vendor research using procurement software, evaluation of proposals, contract negotiations, and post-implementation review, demonstrating the structured nature of purchasing (Sperry, 2020).

In contrast, buying typically involves less formal procedures. Day-to-day operational purchases—such as office supplies or minor equipment—are often managed through routine processes, sometimes supported by procurement systems like Lawson, which facilitate order entry, approval workflows, and tracking. These activities are integral to operational efficiency but are distinguished from strategic, large-scale purchasing activities that involve bidding, negotiation, and contracting (Benton, 2014).

The significance of understanding these differences is evident in organizational efficiency, compliance, and cost management. Formal purchasing processes mitigate risks associated with procurement, ensure transparency, and foster supplier relationships. For instance, capital equipment purchases often undergo rigorous bidding and contractual review, while operational buying benefits from streamlined electronic systems that reduce processing time and errors. Recognizing when to employ each approach enhances overall procurement effectiveness and supports organizational goals.

References

• Benton, W.C. Jr. (2014). Purchasing and supply chain management (3rd ed.). McGraw-Hill Education.
• Purchasing & Procurement Center. (n.d.). Steps to purchasing cycle – standard & tender process. Retrieved from [URL]
• Sperry, R. (2020). Procurement processes and vendor selection. Unpublished discussion entry.
• Kazak, K., & Choi, W. (2009). Improving Customer Service through Just-in-Time Distribution. Baltic Business School at the University of Kalmar.
• McCranie, T. (2020). Just-in-Time purchasing process and applications. Unpublished discussion entry.
• Benton, W.C. Jr. (2014). Purchasing and supply chain management (3rd ed.). McGraw-Hill Education.
• Harvard Business Review. (2015). Strategic Procurement and Supplier Relationships. Harvard Business Publishing.
• Institute for Supply Management. (2021). Principles of Strategic Sourcing. ISM Publications.
• APICS. (2018). Supply Chain Management and Procurement. APICS Reference Resources.
• World Bank. (2017). Procurement Policies and Procedures. World Bank Publications.