What is indirect procurement?
Indirect procurement refers to procuring goods and services that do not directly impact the end product that an organization produces. Instead, such purchases facilitate and support business operations and management while streamlining the manufacturing processes. Business units essentially procure these items for themselves instead of external stakeholders or customers.
For instance, companies would obtain office supplies, machinery, utilities, and electronic hardware and software through indirect procurement.
Consider the example of a baker purchasing an oven. Though an oven may facilitate the baking process, it is non-essential to it. Neither is the good reflected in the bread for the consumer. The process of obtaining this oven is indirect procurement. In contrast, the purchase of flour for bread manufacturing is direct procurement as the bread will contain it.
Many organizations do not centralize their indirect procurement processes, but, like direct procurement processes, they can manage indirect procurement through procurement software solutions too.
What is a procurement plan?