What is Procurement v Purchasing

Well, a very common question I get on our YouTube channel and on our various blogs is

what

the difference is between acquisitions and purchases. Let's hear that from the emerging trend. Okay, so

what

's the difference between acquisitions and purchases? a difference, can we use the terms interchangeably? today we're talking to Trent Morris. Now Trent is a bit of an acquisitions expert. Unfortunately, I guess you'd better tell us why, what makes you an expert? Where have you worked? Sure, yeah, so I've had a few different roles where I've looked at both

procurement

and

purchasing

, so when I was in operational type roles, I was involved in

purchasing

and then more recently I've actually had some roles and some enemies, sure, so you know the operational role.

I actually worked for Beam Suntory, most people would know him as Jim Beam the burbot, which is one of my favorite jobs I've ever had, and more recently I worked for Coca-Cola Anatol on their

procurement

team, dealing of the group's logistics, okay? I've had a bit of experience with some big roles there, so let's get back to the question: what's the difference between acquisitions and purchasing? So I think the easiest way for Rob to explain the difference between acquisitions and purchases is to consider, for example, buying a new car, if you're going to buy a new car, you actually just say SHhhh what you want before you even give a step towards the street, so you would consider the number of seats you need in the vehicle, whether it is all-wheel drive. a sedan, an SUV and then you would start looking at all the manufacturers and what the manufacturers had to do often once you had done that at that point you would move on to getting the prices of the vehicles, the first part was looking into the industry that is procurement, yes, that's understanding how much you want to spend, the type of car you want, how many seats you need, etc., okay, so it's really about looking at what's available on the market, the different suppliers, what their different products are like, if they fit your needs. and so on, yes, but it's not really about buying it exactly right, exactly right, so you need to know what you really want and then once you know what you want, you can go out and find what you want for the right price , now not just the price but sometimes it's the serviceability of the dealership you're talking to, it could be the aftermarket surface or the warranties you're really looking for, but all of those things become purchases versus acquisitions , so a question arises here, I know.

These always separate functions are acquisitions and purchases. I suppose in smaller companies they could be the same. Generally, I would suggest that purchases are a subset of acquisitions and occur to the extent that acquisitions guide the purchasing process. A purchasing manager opposite the purchasing officer generally will not buy. cancel anything unless the contract has been established by procurement first, that way yes procurement and purchasing are linked, sometimes they are decentralized to the extent that an operations team can handle purchasing if they are talking of widgets or something like that, but if you're talking about something that's more indirect, something like travel, which might be governed by a centralized body, and in a smaller business, if there's just small business owners looking at this, it's usually going to be a high-level person who will direct. say, "We're going to buy our widgets from this supplier and negotiate supply and pricing, etc., and then an admin person or someone in purchasing actually makes the purchase exactly right, Rob, so procurement usually has the authority on name". of the company to interact with suppliers to actually make deals, the person who executes those deals is the person who buys and would usually be a younger resource for the business, okay, then other terms come up and there may be some confusion around the management of these categories.

That and supplier relationship management are the same, surely not, they are not. If we look at procurement as a function of the business, it would typically deal with three separate parts of the business and those three parts would be broadly divided. in category management and then it's understanding what you're going to spend and how you're going to spend it, then a category manager would hand it off to a sourcing team and the sourcing team would go out and set up the sourcing first and then they would pass it on to a supplier relationship management team who will make sure the supplier is performing according to the house requirements all the dumb questions yeah so what is a category?

Indirect spending versus direct spending? spend or is it like travel fuel, that kind of thing, in my experience there are usually three types of categories at a much higher level, so you have direct and that is the product that is actually sold in the market, so In the FMCG space it could be the ingredients in the liquids, the cans, the bottles, anything that touches the product indirectly, it's everything else that is used to get the product to market, whether from a supply or demand perspective and finally the third, which is quite IT and now information services are often separated because it is a very complex environment in itself and requires specialized knowledge.

Well, a question I've been asked often and sometimes bother people with the answer to is: where should inside acquisitions be reported? a business structure, that's a great question and I've come across two separate areas. I'm working with a client right now and I'm working with the COO because the vast majority of his spend is in the direct space. yes, and he wants to govern, he wants to understand the requirements related to capital employed, etc., on the other hand, in many organizations, it actually belongs to the CFO. Well, I think the best way to think about it would be logically straddling those two teams.

Who you report to It is perhaps less important to accept the fact that procurement is required to interact with all parties to ensure that money is well spent and that the company really gets the best value for money than you want your procurement to be a good value. career because there could be There will be people watching this or something like that and they're getting into the acquisition space. What would be a good way to do it so far? I found Killman to be a great role. I have held various roles within the supply chain and I must admit the procurement sector.

For me personally, he is one of my favorites. I really enjoy the supplier relationship management aspect of procurement, how to relate to people and help them get the best out of them so we know we are getting good value for money. I really enjoy that part. Typically, an easy way to get into acquisitions is to simply raise your hand and tell your management team, Yes, I'm interested in acquisitions, but understand that you'll want to get in at a point where you have experience. For me, my entry point into procurement was through logistics. I had over 15 years of logistics experience when I entered procurement, so it was an easy and enjoyable transition for me.

I think any other way you would want to start at a more junior level and get into this maybe a graduate program or something sounds good so I think we've answered the question of what is the difference between acquisitions and purchasing and in Simply put, your analogy of going car shopping is looking at the market from all points of view. different brands and their features and what brains you might want to buy and then buying is actually going out and negotiating the deal and buying the absolutely perfect product thanks for that friend, so there we go to another topic and by now you should realize that we have new The Videos come out on a Wednesday so if you're not subscribed hit the subscribe button below if you hit the bell apparently you'll get an email every time we post a new video and comment below if you have any questions.

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