Direct Procurement
Definition:
Direct procurement refers to the process of purchasing goods and services that are directly related to the production of an organization's end products or services. This typically includes raw materials, components, and subcontracted services that are incorporated into the final product.
Example:
Acme Manufacturing's direct procurement team is responsible for sourcing and purchasing the direct materials, such as such as semiconductors, resistors, and capacitors, that are used in the company's products. They work closely with suppliers to ensure a consistent supply of high-quality components at competitive prices.
Why are Direct Materials Important to Procurement teams?
Direct procurement is a critical function for organizations, as it directly impacts product quality, cost, and availability. Procurement teams must develop deep expertise in the specific materials and services they purchase, staying informed about market trends, supply risks, and innovation opportunities. By implementing strategic sourcing techniques, such as supplier consolidation, long-term contracts, and value engineering, procurement teams can drive significant cost savings and improve the overall competitiveness of their organizations.