“Direct purchase” and “procurement” are two different approaches to acquiring goods or services within an organization, each with its own characteristics and implications:
- Direct Purchase:
- Definition: Direct purchase refers to the buying of goods or services directly from a supplier without involving a formal procurement process.
- Scope: It usually involves one-off or occasional purchases of items that are readily available in the market and do not require complex negotiations or contracts.
- Process: Direct purchase typically involves identifying the need for a specific item, locating a suitable supplier, negotiating terms (if necessary), and making the purchase directly.
- Characteristics:
- Often used for low-value or non-strategic items.
- Usually faster and simpler than procurement processes.
- May not involve rigorous supplier evaluation or long-term contracts.
- Examples: Office supplies, maintenance and repair parts, some raw materials.
- Procurement:
- Definition: Procurement is a systematic process for acquiring goods, services, or works that involves planning, sourcing, contracting, purchasing, receiving, and managing suppliers and contracts.
- Scope: It covers a wide range of activities, from strategic planning and supplier selection to contract management and performance evaluation.
- Process: Procurement involves multiple stages, including needs assessment, market analysis, supplier identification, negotiation, contract award, order placement, receipt of goods or services, and ongoing supplier relationship management.
- Characteristics:
- Often used for high-value, critical, or strategic items.
- Involves formal procedures, documentation, and approvals.
- Emphasizes strategic sourcing, supplier relationship management, and risk mitigation.
- Examples: Equipment purchases, IT systems, consulting services, construction projects.