Purchasing or procurement activities are a part of our daily lives and are often not given much thought by individual buyers. However, in an organisational setting, it can cause a massive change within the revenues and achievements of the Corporate Social Responsibility and value creation goals that a company sets for itself.
Mass consumption products have an inelastic demand which means that the demand is unaffected by the change in price. This implies that the customers will keep buying the products even though the price is high.
On the other hand, keeping the price of these products low is in the best interest of the companies selling them because it could give them a great competitive advantage and make the operations sustainable in the long run (Etzel, Walker & Stanton, 1997).
Terminology of Procurement versus Purchasing
The terminology of procurement vs purchasing can perhaps be best explained using the PP Organogram, as shown in the diagram below. The diagram depicts the focus of purchasing on system and process, whereas procurement is focused on the active interaction with suppliers, as well as with internal customers. This article will adopt the terminology of procurement where the activities involved require active interaction both internally, and with suppliers.