DIRECT vs INDIRECT Procurement A simple comparison for Procurement Professionals

90% of the content you see on Procurement applies to Indirect procurement. Whether it is framework, templates, or AI in procurement and discussions.

Why? Indirect is relatively much simpler and generic.

It's the Direct material procurement where complexity resides. It is where every organization spends most of its money and time.

Some traits of Direct Material

1.) No one runs an RFP for Direct Materials.

2.) You can't afford Stock Outs

3.) Excess inventory? Your P&L takes a massive hit.

4.) USD 200/KG versus USD 200.10/KG makes a MASSIVE difference on your procurement spend and P&L

5.) A small quality reject in one bag means the entire shipment of 10,000 bags and subsequent shipments are rejected

6.) Vendor swap takes years, not months

7.) eSourcing can not be used because the decisions are taken looking at the trading platform and not submitting quotes on a esourcing platform

8.) Spend analysis tells half of the story, and category managers know significantly more than the tool because not all the attributes are available on the system.

So, while Indirect procurement gets all the attention (and it's cute), Procurement value creation happens in Direct material Procurement.

I will talk about Capex vs Opex procurement tomorrow.

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