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verification. (December 2022) |
Indirect procurement is the sourcing of goods and services not related to manufacturing for a business to enable it to maintain and develop its operations. The goods and services classified under the umbrella of indirect procurement are commonly bought for consumption by internal stakeholders (business units or functions) rather than the external customer or client.
Indirect procurement categories include, but are not limited to:
The overarching classification of ‘indirect’ can vary from business to business. Increasingly, the distinction between a ‘direct’ cost and an ‘indirect’ cost can become blurred (as classic debate of what is Capex and Opex) when looking at such expenditure items, for e.g. Fleet and Transportation. Companies' senior executives are often responsible for agreeing and defining this classification for simplifying their own financial, accounting and reporting structures.
Organizations with a clear definition of direct procurement (otherwise referred to as Goods for Resale, primary procurement, common goods procurement or core procurement) have spent decades engineering their primary supply chain, ensuring that:
Indirect procurement (otherwise referred to as Goods Not for Resale (GNFR), [1] non-core procurement, non-common procurement or enabling spend), compared side-by-side with direct procurement, is often seen as less strategic, relatively immature, [2] and less valuable: research conducted by NelsonHall, in association with Proxima, found that 53% of Senior Executives from FTSE 100 businesses expressed low satisfaction in the value indirect procurement brought to their organization. [3]
Research conducted in association with Supply Management [4] found that all businesses have indirect procurement. The research also found that indirect procurement is unambiguously different from direct procurement in that it has smaller average supplier spends, more suppliers, more maverick spend and a more complex stakeholder environment than directs. The UK House of Commons Public Accounts Committee defined 'maverick spend' as the purchase of "legitimate goods but [using] unauthorised buying arrangements or unapproved suppliers". [5] Indirect procurement requires a different balance of disciplined processes and technology from those required for direct procurement, wider engagement with stakeholders and more diverse expertise across a range of suppliers. Overall:
Managing indirect expenditure effectively requires a huge variety of skillsets such as:
This article needs additional citations for
verification. (December 2022) |
Indirect procurement is the sourcing of goods and services not related to manufacturing for a business to enable it to maintain and develop its operations. The goods and services classified under the umbrella of indirect procurement are commonly bought for consumption by internal stakeholders (business units or functions) rather than the external customer or client.
Indirect procurement categories include, but are not limited to:
The overarching classification of ‘indirect’ can vary from business to business. Increasingly, the distinction between a ‘direct’ cost and an ‘indirect’ cost can become blurred (as classic debate of what is Capex and Opex) when looking at such expenditure items, for e.g. Fleet and Transportation. Companies' senior executives are often responsible for agreeing and defining this classification for simplifying their own financial, accounting and reporting structures.
Organizations with a clear definition of direct procurement (otherwise referred to as Goods for Resale, primary procurement, common goods procurement or core procurement) have spent decades engineering their primary supply chain, ensuring that:
Indirect procurement (otherwise referred to as Goods Not for Resale (GNFR), [1] non-core procurement, non-common procurement or enabling spend), compared side-by-side with direct procurement, is often seen as less strategic, relatively immature, [2] and less valuable: research conducted by NelsonHall, in association with Proxima, found that 53% of Senior Executives from FTSE 100 businesses expressed low satisfaction in the value indirect procurement brought to their organization. [3]
Research conducted in association with Supply Management [4] found that all businesses have indirect procurement. The research also found that indirect procurement is unambiguously different from direct procurement in that it has smaller average supplier spends, more suppliers, more maverick spend and a more complex stakeholder environment than directs. The UK House of Commons Public Accounts Committee defined 'maverick spend' as the purchase of "legitimate goods but [using] unauthorised buying arrangements or unapproved suppliers". [5] Indirect procurement requires a different balance of disciplined processes and technology from those required for direct procurement, wider engagement with stakeholders and more diverse expertise across a range of suppliers. Overall:
Managing indirect expenditure effectively requires a huge variety of skillsets such as: