What are the examples of direct and indirect procurement?
Procurement departments use direct and indirect procurement processes to fulfill contrasting organizational needs.
The Goods or services bought through direct procurement processes are incorporated into the end product.
Examples of direct procurement include:
- A bakery’s purchase of flour and eggs to make bread,
- A designer's purchase of cloth to sew into clothes,
- An automobile company's purchase of tires for its cars,
- A lighting manufacturer's purchase of glass to create lighting casings or fixtures.
- A carpenter's purchase of wood to create furniture.
Goods sourced through indirect procurement are not incorporated directly into the end-product, even though they may help in manufacturing. Examples of indirect procurement include:
- The bakery's purchase of refrigerators to keep its products cool.
- The designer's purchase of a Fashion Design Software to help in modeling,
- The automobile company's purchase of robots to help assemble the car.
- The lighting manufacturer's purchase of personal computers for its employees.
- The carpenter's purchase of a saw to cut the wood.