Direct and Indirect Procurement
Direct vs Indirect procurement are terms used to indicate if a procurement category is directly related tot the primary business of an organization. Direct procurement refers to third party services and goods that are part of-, or used in the manufacturing, of the organization’s products and or services. Indirect procurement refers to categories of goods and services that are supporting the organization’s business processes. Similar terms commonly used for the same by Manufacturers are Product Related (PR) vs Non-Product related (NPR) for respectively Direct- and Indirect procurement. For most organizations Direct procurement represents a much larger percentage of total spend than Indirect procurement. Subsequently indirect procurement often receives less management attention than direct spend categories. Note that the same goods may be considered a Direct category for one organization, and Indirect for another. This is determined by the market they operate in and internal guidelines.