Procurement: Let's Agree On Terminology

What do we mean by procurement or purchasing? While the question might be throwaway to some, the answers can make a real difference

Procurement is often a mysterious world to the uninitiated, with many varied perspectives on what it actually is and what it does. The meaning of terms particularly purchasing, procurement, sourcing and buyer often get muddled, and not without consequence. It’s one of the idiosyncrasies of the profession that whomever you ask, they will provide you with a different opinion on their definition – marketing has no such issue.

The changing terms makes it confusing for professionals when applying for jobs; every role has a different interpretation by prospective employer, applicant and recruiting organisation making it difficult to know what you are actually applying for.

A similar quandary was posted on a Strategic Sourcing & Procurement LinkedIn group, asking if they all in fact meant the same thing. While this brought a multitude of different responses, the overwhelming response was ‘no’. In the main I concur: all four words are related and work towards the same outcome in obtaining goods and services in line with demand, but they have different implications which we should be mindful of, even in terms of how functions view themselves and their responsibilities.

Procurement is the overarching umbrella that describes the end-to-end process to obtain goods or services. This includes sourcing; the process taken to obtain suppliers including market research and vendor evaluation.

Procurement Leaders has put together a guide to the meaning of procurement (here), while service providers like Procurian also have lists of definitions, a trend which serves to highlight the challenge with understanding terminology. Some include sourcing terms such as global sourcing; purchasing from a global market and strategic sourcing; the formal process of selecting a vendor.

Purchasing is the process by which you order and receive services and goods, essentially raising the purchase order and receipting the goods. Whereas buyer is the person that carries out the purchasing. If that sounds a little facile, it’s worth remembering that there are consequences to not having this understanding in place.

The terminology issue can bring challenges within a tender process where varying interpretations on contracts can differ between bidders.

There have been cases such as the Vogon International v Serious Fraud Office (SFO) where the two parties disagreed on the invoice price by almost £300,000 due to a misunderstanding on what was meant by the word “database” as part of the requirement. I agree the result of court action is not the best outcome because terminology was unclear. The time and legal fees that accumulated by a misunderstanding on terms seems quite counter-productive.

This is, as always, an area rife for debate and I am always interested to hear the varied opinions on terminology and whether there is an issue with having different interpretations. I firmly believe some standardisation is required – we need a common language here. Above all, let’s not make things more complicated then they need to be.

from Procurement Leaders Blog http://ift.tt/1ecWw0H

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The views expressed in this post and throughout the series are the autor's own and not intended to reflect the views the YQ Matrix platform, its users or any associated organisations.



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