| John Spacey, December 20, 2016 updated on January 14, 2023
Direct procurement is a formal process for acquiring goods and services to be used directly in your products and services.Indirect procurement is a formal process for acquiring goods and services to be used internally.
Direct Procurement vs Indirect ProcurementDirect procurement is typically a strategic function of a business that has implications for profit margins, operational efficiency, product design and customer experience. As such, direct procurement processes may be highly optimized with investments in technology and organizational structures.Indirect procurement is more of an administrative process that is geared to financial controls. It isn't typically viewed as a competitive advantage. The products and services considered within the scope of direct procurement vary by industry.
Example: Capital Equipment A cloud infrastructure provider will view computing equipment for its data centers as direct procurement. A fashion company that uses computers to design products will view computing equipment as indirect procurement.
Example: ExpensesAn IT consulting firm will use indirect procurement processes to buy tissue paper provided as an office supply. A hotel will use direct procurement processes to purchase tissue paper for rooms.
|Direct Procurement||Indirect Procurement |
|Definition||Procurement of goods and services that are directly used in your products.||Procurement of goods and services that are used internally.|
|Viewed As||Competitive Advantage||Financial Control|
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