By Alvin A. MINGLE
In the ever growing and increasingly important procurement industry In Ghana, as in many parts of the world, there seems to be some misconception that the terms Procurement & Purchasing are one and the same thing and the terminology is often used interchangeably.
“Purchasing” tends to be more tactical buying with price being the main determinant of the decision-making process. Simply obtaining “Three (3) quotes” from suppliers and selecting the cheapest option leaves a lot of unrealized value and opportunities for both the buyer and the seller.
“Procurement” on the other hand is distinctly different. Procurement is a strategic process that involves planning, supplier relationship management, cost analysis, risk assessment, risk mitigation and value creation. In my close to three decades of procurement practice, I seek to explore the key differences between these two concepts whilst enabling professionals to derive more value for their organisations. This distinction is critical for achieving cost efficiency, operational effectiveness, and long-term sustainability.
- Definition and scope
A clear instance is a school administrator needing 100 chairs may simply request three quotations from different vendors and choose the cheapest option. This is clear purchasing nothing more nothing less, the price being the cheapest option is placed above all else in this process. However, in the same instance, if the same administrator considers long-term durability, supplier reliability, maintenance services, and warranty agreements before making a decision, they are in essence engaged in procurement.
- Focus on cost vs. value
Another classical example for illustration may be a governmental agency which needs to procure supplies for their teams. If the final sourcing decision is based solely on the cheapest supplier, the risk of receiving substandard or expired products increases with its inherent challenges. However, a procurement approach would assess supplier reputation, product quality, after-sales service, and compliance with regulatory standards, ensuring long-term value for the organisation.
- Short-term vs. long-term approach
An organizational example is a manufacturing company in Tema that buys raw materials without necessarily considering long-term supplier relationships. It may face inconsistent supply or price volatility, which is highly predictable and expected when dealing with suppliers. While a procurement-driven approach would involve negotiating long-term contracts with suppliers to ensure stable pricing, quality control, and a reliable supply chain.
- Supplier relationships
In this instance, a government agency acquiring office stationery, for example, through competitive bidding may change suppliers frequently based on just price. However, a strategic procurement approach would identify key suppliers who can provide consistent quality, negotiate bulk discounts, and establish a framework agreement for future supplies.
- Risk management
- Compliance and regulatory considerations
Public procurement in Ghana is governed by the Public Procurement Act, 2003 (Act 663) and its amendments. A strategic procurement-led approach ensures that government contracts follow due process, preventing corruption and ensuring fairness. A purchasing-only mindset may lead to shortcuts, single sourcing without appropriate justification and legal violations.
Conclusion
In today’s competitive and regulated environment, procurement in Ghana must be viewed as a strategic function rather than just a price-comparison exercise. This enables organisations to shift from being “price takers” within the buyer/supplier dynamics into organisation with more control over the buying decision. Benefits include better supplier relationships, cost savings in the long run, reduced risks, and improved operational efficiency.
For both the public and private sectors, procurement should go beyond “three (3) quotes and a buy” to more strategic procurement. Decision-makers must embrace procurement as a strategic enabler rather than a mere administrative function. This will ensure value for money, quality, and sustainable business growth.
>>>the writer is Senior Managing Partner Fitzgerald Bassey Consultancy Limited
