When I first joined procurement, I thought the job was simple: buy what the business needs at the best price. But it didn’t take long to realize that not all purchases are created equal. One of the biggest mental shifts I had to make was understanding the difference between direct and indirect procurement. They sound similar but behave very differently in practice.
Let me walk you through what I’ve learned.
Direct procurement is what most people think of when they hear “supply chain.” It’s the stuff that goes into the product your company sells. If you're in manufacturing, that means raw materials like steel, plastic, or electronics. In food services, it's the ingredients. For a construction firm, it's cement, glass, and equipment.
In other words,
No direct procurement = no product to sell.
What Stands Out in Direct Procurement:
Indirect procurement covers everything that helps the business run but doesn’t show up in the final product. Think laptops, marketing services, SaaS tools, office furniture, or even cleaning services.
When I first got involved in indirect spend, I underestimated how messy it could get. You’re buying a lot of small things, often for a lot of different departments, and it’s not always centralized.
The Reality of Indirect Procurement:
| Direct Procurement | Indirect Procurement |
| Directly tied to production and revenue generation | Supports business operations without directly influencing production |
| Raw materials, components, and production-related services | Office supplies, IT services, and facility management |
| Strategic supplier partnerships focused on quality and reliability | Transactional supplier relationships centered around cost-efficiency |
| Handled by specialized procurement teams with deep knowledge of the industry and product requirements | Managed by general procurement teams or even decentralized across various departments |
| More complex and involves detailed specifications and quality checks | Simple and focus on efficiency and cost control |
| Directly affects the cost of goods sold (COGS) and has a direct impact on the company’s profitability | Classified as operating expenses (OPEX) and impact the overall operational efficiency |
| Budgeting for direct procurement is usually tied to sales forecasts and production schedules | Managed through departmental budgets, often with a focus on reducing overall operational costs |
When I first joined procurement, I thought spend control just meant “buy cheaper.” Turns out, it's way more nuanced depending on what you're buying.
Because direct procurement is tied to production, it's easier to track. You’re making fewer but larger purchases, and they usually go through centralized teams. If your forecasting and supplier contracts are dialed in, you can drive real savings at scale.
High visibility means better budget planning.
You can negotiate volume discounts.
But if a supplier fails? Production stops—and costs skyrocket.
This is where things can go sideways without anyone noticing. A dozen small teams buying their own software or services can create a silent drain on cash.
Spend is fragmented across departments.
You risk redundant vendors and overlapping tools.
Without central tracking, you lose cost control.
Lesson I learned: Direct spend is easier to control upfront. Indirect spend needs more systems, policies, and education to keep it clean.
Over time, I’ve learned that effective procurement isn’t just about getting the best price. It’s about building the right habits, using the right tools, and knowing when to adapt based on what you're buying.
Here are some practical practices that made a real difference in how I manage both direct and indirect spend.
Understanding the difference between direct and indirect procurement isn’t just theoretical. It shapes how you prioritize vendors, manage risk, and even design approval workflows. Direct impacts your ability to sell. Indirect keeps the lights on. Both matter, but in very different ways.
As someone new to the field, if there’s one thing I’d tell myself when I started, it’s this:
Don’t treat all spend the same.
Learn the context.
Tailor your approach.
And never underestimate how indirect spend can sneak up on you.