Indirect Procurement
Definition:
Indirect procurement refers to the purchase of goods and services that are not directly incorporated into an organization's end products or services but are necessary for its day-to-day operations. Examples of indirect purchases include office supplies, IT equipment, professional services, and maintenance, repair, and operating (MRO) items.
Example:
Acme Manufacturing's indirect procurement team is responsible for managing the purchase of goods and services that support the company's operations, such as office furniture, computers, software licenses, janitorial services, and spare parts for production equipment. These purchases are not directly used in the manufacturing process but are essential for the smooth functioning of the organization.
Why is Indirect Procurement important to an organization?:
Indirect procurement is important for organizations, as it can represent a significant portion of overall spend and have a substantial impact on operational efficiency and costs. Procurement teams must strategically manage indirect spend to ensure that the organization receives the best value for its money, while also streamlining processes, reducing waste, and mitigating supply risks. Effective indirect procurement management can involve techniques such as category management, supplier consolidation, standardization, and automation. By optimizing indirect procurement, procurement teams can contribute to the organization's overall cost competitiveness and operational excellence.