Indirect procurement

Indirect procurement is the sourcing of all goods and services for a business that enable its activity. Or looking at it another way, the goods and services classified under the umbrella of indirect procurement are commonly bought for consumption by internal stakeholders (business units or functions) rather than the external customer or client. Indirect Procurement categories include, but are not limited to:

The overarching classification of ‘Indirect’ can vary from business to business and increasingly the distinction between what is a ‘Direct’ cost and an ‘Indirect’ cost can become blurred when looking at such expenditure items as Fleet and Transportation.

Organizations with a clear definition of ‘Direct’ Procurement (often called Goods for Resale, primary procurement, common goods procurement or core procurement) have spent decades engineering their primary supply chain – ensuring:

'Indirect’ procurement (often called Goods Not for Resale, non-core procurement, non-common procurement or enabling spend), compared side-by-side with direct procurement is often seen as less strategic and less valuable – research conducted by NelsonHall, in association with Proxima found that 53% of Senior Executives from FTSE 100 businesses expressed low satisfaction in the value indirect procurement brought to their organization.

Research conducted in association with Supply Management found that all businesses have indirect procurement. The research also found that indirect procurement is unambiguously different from direct procurement in that it has smaller average supplier spends, more suppliers, maverick spend and a more complex stakeholder environment than directs.

Indirect procurement requires a different balance of disciplined processes and technology, engagement with stakeholders and diverse expertise across a range of suppliers. Overall:

Managing indirect expenditure effectively requires a huge variety of skillsets – which can change from one week to the next. Skillsets such as:

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