Direct versus indirect procurement.

Direct procurement buys the materials, components and services used to make the product or deliver the organisation’s core offering. Indirect procurement buys the goods and services that keep the organisation operating.

The same item can belong to either category depending on how the business uses it. Steel used to manufacture a product is direct spend. Steel used to maintain an office is usually indirect spend. Classification should follow the purpose of the purchase, rather than the supplier’s name.

Both need commercial discipline. Direct procurement often puts production continuity, specification and supplier capacity at the centre of the decision. Indirect procurement often deals with a broader range of internal users, buying channels and service outcomes.

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