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Direct and indirect procurement

Explore the differences between direct and indirect procurement and how it’s used within an organisation

What is direct procurement?

Direct procurement is the procurement of raw materials required for the manufacture of goods.These materials could be:

  • Raw materials
  • Machinery
  • Ingredients for food production
  • Mechanical parts
  • Products for resale
 

What is indirect procurement?

Indirect procurement is the procurement of supplies or services that contribute to the day to day running of the organisations but do not form part of the finished goods. These could be:

  • Office furniture
  • Technology equipment such as printers, phones, computers
  • Maintenance costs to run the building (gas, electric, water)
  • Facilities managements such as cleaning suppliers
  • Employee management such as training sessions
  • Software
  • Marketing such as advertising, PR, creatives
 

What is the difference between direct procurement and indirect procurement?

The simplest way to understand the differences is that direct procurement drives profit and performance within your organisation. If direct procurement stops operating your organisation will not be able to manufacture products and will therefore not be able to create any revenue. Indirect procurement is the expense of day-to-day operations and does not contribute to profit. However, indirect procurement does help to drive efficiency.

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What is direct and indirect spend in procurement?

Both direct and indirect spend are key aspects of procurement. Direct spend focuses on materials that will be sold to customers and indirect spend is the expenses for keeping the business running efficiently.

 

What is procurement?

Procurement involves the buying of goods and services that enables an organisation to operate their supply chains, in a profitable and ethical manner. Explore deeper into how procurement is defined, the role it plays and a how a career in procurement can benefit you.

Procurement key themes

What is procurement Types of procurement Public sector
eProcurement Procurement supply cycle Innovation cycle

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