What is the difference between purchasing merchandising and buying supplies

In the overall supply chain process, the procurement function stops once your company has possession of the goods. For a business to make a profit, the cost of procuring your goods must be less than the amount you can sell the goods for, minus whatever costs are associated with processing and selling them. Procurement is an umbrella term that includes several core business functions and should form a key role in corporate strategy. Four key aspects are:.

Therefore, to be truly effective, procurement needs to have a broad view of company needs, values and direction. It includes raw material gatherers, manufacturers, transportation companies, wholesale warehouses, in-house staff, stock rooms right down to the employee at the register.

It also includes the tasks and functions that contribute to moving that product, such as quality control, marketing, procurement, and sourcing. Using the above analogy, the supply chain can be considered the entire chair, while procurement and sourcing are parts of the chair. In summary, Procurement is the process of getting the goods you need, while Supply Chain is the infrastructure extensive, in many cases needed to get you those goods.

Find the latest information in our eBook about a career in procurement, including current job opportunities, soft skills you need, salary information and more. A supply chain is the network of manufacturers, suppliers and logistics providers needed to get a specific product to your business and, subsequently, your customers.

At its core, supply chain management is the act of overseeing and managing a supply chain to ensure it is operating as efficiently as possible. Predominately it is ensuring that all suppliers and manufacturers are maintaining the desired quality of production and are engaged in ethical business practices. The latter point is a significant issue faced by many organisations today.

Supply chain management should ultimately be considered one of many responsibilities faced by a procurement function. By highlighting these differences, we will get a better, more fulsome understanding of the intricate procurement world.

Every step in the Supply Chain Process is becoming more data-driven. Artificial Intelligence has become an effective way to increase efficiencies and profitability, making comprehensive analysis of data the new norm. Logistics, purchasing and supply chain professionals urgently need to gain relevant qualifications and experience to benefit from the emerging opportunities in modern procurement.

Find the latest information in our eBook about a career in procurement, including current job opportunities, soft skills you need, salary information and more! Log in Remember me. Lost your password? Although your business may purchase supplies and inventory from some of the same vendors, you use these items differently — so they should be recorded into your bookkeeping system separately.

Supplies are items your business uses for infrastructure and operations; they aren't necessarily part of the finished physical product your customer purchases. Inventory describes items that you will sell or will use to create the products you sell to your customers down the line. Supplies are items such as paper clips that you use in the daily workings of your business. Inventory refers to anything you will either sell to your customers or use in a product you will sell to you customers, whether you have made it or bought it.

Your business is required to pay sales tax on supplies, but not on inventory. This is because merchandise is generally only taxed once, at the retail level. When you buy supplies such as paper clips that you use to organize and file your own reports, your business is the end user because you use the paper clips rather than selling them.

If your business prints and clips together documents for other businesses, these paper clips would count as inventory and would not be subject to sales tax when you buy them. Your customers will be responsible for paying the sales taxes on the documents you have printed and clipped. The distinction between supplies and inventory is important because it helps you keep track of direct production costs versus overhead operating costs. Variable expenses include inventory and manufacturing payroll, and they represent the amounts you actually spend to make your products.

Tracking variable costs helps you to track efficiency and evaluate your margins, so you can use this information to make your company more profitable.