> ... > Intelligence hub Procurement Direct indirect

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.

Hide this title

Supplier relationships

There are some key differences between direct and indirect procurement when looking at supplier relationships. Direct procurement focuses on long-term collaborative relationships. There is a real need for the direct procurement teams to build resilient relationships which will provide security for both your organisation and the suppliers organisation. Indirect procurement deals with non-essential supplies and focuses on reducing and managing expenditure.

Inventory

Inventory management is critical to direct procurement. If supplies run low, it will be detrimental to the whole supply chain, so direct procurement needs to manage this effectively. Whereas inventory for indirect procurement is not a priority.

Structure

As direct procurement is a huge part of the organisation’s revenue and profit, there is usually a dedicated direct procurement team. Whereas indirect procurement is a delegated function given to a variety of stakeholders across different departments.

 

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

Become a CIPS member

Achieve your potential by becoming a member today. Whether you want to become a studying member or want to upgrade your membership to MCIPS, you’ll receive support and guidance whatever career level you’re at.
A smiling woman in a dark top stands with her arms crossed, looking away and slightly up. She is framed by two large blue concentric circles and a vibrant blue background with radiating orange-dotted lines.

Access the latest research, whitepapers and tools across a range of key procurement and supply topics.

Definitions of procurement and supply guide

This paper explores definitions in procurement and supply chain management. It aims to give you a greater understanding of definitions and how they have developed over the years.

Single vs sole sourcing guide

There are many benefits to single and sole sourcing but there are also risks associated. If managed effectively then it has the potential to reduce costs and improve relationships in the supply chain. This document will provide you with a greater understanding of single/sole sourcing and the potential benefits to your organisation when successfully implemented.

Global vs local sourcing guide

This article is based on the arguments for global versus local sourcing as debated at a past event for CIPS Fellows. The case for global sourcing was put forward by Professor Richard Lamming, now former Director of the Centre for Research in Strategic Purchasing and Supply, in the School of Management at the University of Bath. While Professor Martin Christopher, now Emeritus Professor at Cranfield School of Management, based in Cranfield University, put forward the case for local sourcing.

Strategic role of procurement guide

There are many benefits to strategic procurement and when successfully implemented it can provide cost savings, mitigate supply risks, and improve your relationships with strategic suppliers. This document will provide you with an understanding of strategic procurement and will briefly explore application, advantages/disadvantages, and some hints & tips.

Take a procurement for beginners training course

Icon of two arrows in opposite directions symbolizing procurement processes and training

Procurement Skills Training

Accelerate your learning and keep your knowledge and expertise up to date with our procurement for beginners training courses.

BEGINNERS PROCUREMENT TRAINING

On this page