Buying & Procurement (BP)
Buying is defined as to acquire the possession of, or the right to, by paying or promising to pay an equivalent, especially in money. The buying decision process is the decision-making process used by consumers regarding market transactions before, during, and after the purchase of a good or service.
Purchasing refers to the process by which a company contracts with third parties to obtain goods and services required to fulfill its business objectives in the most timely and cost-effective manner". Purchasing activities are needed to ensure that needed items are obtained in a timely manner and at a reasonable cost. A purchasing department is especially necessary for a manufacturing business, where large amounts of raw materials and components must be obtained on a recurring basis.
Procurement is a purchasing process that controls quantity, quality, sourcing, and timing to ensure the best possible total cost of ownership. Procurement may be a simple purchasing arrangement with a supplier. It may also involve a more complex arrangement with the seller or a group of suppliers that ties required quantity, quality, and delivery into a production process.
The stages of procurement include information gathering (i.e. who are potential suppliers), supplier contacts (i.e. gathering information about the potential suppliers, background reviews (i.e. vetting, screening, checking references of potential suppliers), negotiations (i.e. setting the price and terms), fulfilment (i.e. delivery and installation), consumption, maintenance, and disposal (i.e. monitoring the actual delivery and use of the supplies or equipment), and renewal (i.e. reorders and continuing relationship with the supplier). Problems on a company's cash flow and balance sheet can be traced to problems with procurement, including holding supplies and inventory too long and having the terms of payables for supplies not matched to their respective receivables.