“What’s in a name?”, asked William Shakespeare famously. Actually, quite a lot, when we’re talking about procurement, purchasing and sourcing, says Luca Ramasco, Italian procurement specialist and author.
Professionals working in our fascinating business area agree nowadays in defining the process – from the specification of needed goods & services through to the supplier performance review – as PROCUREMENT. There is wide literature that backs up this conclusion.
Nevertheless, PURCHASING and SOURCING also keep being extensively used to signify the same process. Actually, the distinction between them is quite a recent manifestation. One of my favourite books, which contributed much to my development, is “Profitable Purchasing Strategies” by Paul Steele and Brian Court, released in 2000. Let me say that the title of the same book today would probably be “Profitable Procurement Strategies”, as it covers mainly the upstream part of the process, or, at a future time, “Profitable Sourcing Strategies”.
At any rate, many business professionals are still indifferently using Purchasing or Sourcing, when talking about Procurement. It is still common to come across the job titles of Purchasing Director or Purchasing Manager, but without any willingness on the part of the employer to reduce the scope of responsibility of the people covering those roles. Every day on Linkedin you can still find posts or job searches naming this very same process with different labels. Some even refer to the same process as Supply Chain. In addition, even the definitions given by official organisations or associations are not very clear.
The situation is not helped by Latin languages which contribute to the confusion: in a Spanish dictionary, you will find “Aprovisionamiento”, which common meaning usually just refers to the the refilling of stocks, as a translation for Procurement, whereas “Compras”, normally found as a translation for Purchasing, is the term Spanish professionals associate with the more extensive process. The same mismatch happens in French with “Approvisionnement” et “Achats”, or in Italian with “Approvvigionamenti” e “Acquisti”.
It would be useful to have a clearer definition of what part of the business process is meant. In my experience, there is too often a substantial amount of time spent just on conveying the basic concept to staff across an organisation that procurement is a process.
I personally like the simplification which calls SOURCING the upstream part of the process, PURCHASING the downstream and PROCUREMENT the entire process.
But, to be pragmatic, the key point in my opinion is to make sure that you are on the same page as your interlocutors when you mention procurement or purchasing or sourcing. The main risks are about misunderstandings or overlapping activities. If those risks are well addressed, the definition you give becomes less of an issue.
By Luca Ramasco – Procurement Director, Italy