In brief
Indirect procurement buys goods and services that do not go into the end product, such as MRO materials, services and operating equipment.
Contents
What is Indirect procurement?
Unlike direct procurement, which sources raw materials and components for production, indirect procurement covers the requirements of running the business. This includes spare and wear parts, tools, personal protective equipment, office and IT supplies, facility services, energy, logistics and consulting services as well as capital goods.
Characteristic features are many requesters, heterogeneous categories, a large number of suppliers and often poorly standardised processes. A considerable proportion of orders are of low value but generate process costs similar to larger orders. In indirect procurement, process efficiency, demand pooling and supplier consolidation are therefore often more in focus than pure price negotiations.
Typical instruments are catalogues and electronic ordering systems, framework agreements with call-offs, purchasing cards for small requirements and targeted tail spend management. For technical parts, specialist knowledge is also needed so that orders are clearly specified. Because requesters are spread across many departments, acceptance of the processes often determines success: ordering channels must be easier than bypassing procurement.
In practice: maintenance and procurement
In manufacturing companies, MRO materials often make up the most technically demanding part of indirect requirements. Close coordination between maintenance and procurement prevents incorrect orders and duplicate stock.
Synonyms and abbreviations: indirect purchasing · indirect spend · non-production materials (NPM) · indirect sourcing
Frequently asked questions
What is the difference between direct and indirect procurement?
Direct procurement buys material that goes straight into the product sold, such as raw materials, semi-finished products or bought-in parts. Indirect procurement covers everything else a company needs for its operations, from spare parts and tools to office supplies and services. Direct requirements can usually be derived from production plans, while indirect requirements arise in a scattered way across many departments.
Which categories belong to indirect procurement?
Typical categories are MRO material such as spare and wear parts, operating supplies and consumables, tools and personal protective equipment, IT and office equipment, facility services, energy, consulting, staffing services and capital goods. The exact classification differs by company and industry. What these categories have in common is that they enable operations but do not become part of the end product.
Why is indirect procurement considered difficult to control?
Requirements arise at many points in the company, often without central planning. The categories are very diverse, the number of suppliers is high and many orders are of low value. As a result, there is often a lack of transparency about spend and contracts. Part of the requirement is also ordered directly by specialist departments. Catalogues, clear ordering channels and pooling help to make this diversity manageable.