Indirect Procurement Explained: Definition, Examples, and Best Practices

17 Jul 2025

Table of Contents

What Is Indirect Procurement?

Indirect procurement refers to the sourcing of goods and services that support a company’s daily operations but are not directly used in the production of finished goods or services. While direct procurement focuses on inputs such as raw materials and components, indirect procurement includes everything from office equipment to IT services, travel, and consulting.

As organizations evolve, indirect procurement is no longer just a support function—it has become a critical lever in the overall procurement strategy for controlling costs, enabling growth, and achieving operational resilience.

Put simply: Direct procurement feeds your product. Indirect procurement fuels your company.

Direct vs. Indirect Procurement: A Quick Comparison

Criteria	Direct Procurement	Indirect Procurement
Purpose	Produces revenue (part of COGS)	Supports operations (OPEX)
Typical Items	Raw materials, components	Software, facilities, travel, marketing
Spend Ownership	Often centralized	Typically fragmented across departments
Impact on Profitability	Directly affects margin	Affects operating efficiency
Strategic Role	Production and product innovation	Process improvement, compliance, agility

Common Categories of Indirect Procurement

Implementing effective category management is essential to control costs and enhance supplier value in indirect procurement. Below are major categories organizations typically manage:

🖥️ IT & Software

· Cloud services, SaaS subscriptions, cybersecurity tools, hardware

🧹 Facilities Management

· Cleaning services, utilities, maintenance, waste management

🧳 Travel & Accommodation

· Business travel booking, hotels, flight services, corporate mobility platforms

🎯 Marketing & Creative Services

· Advertising agencies, content creation, media buying, event promotion

⚙️ MRO (Maintenance, Repair & Operations)

· Tools, lubricants, safety gear, industrial supplies for non-product maintenance

🏢 MICE (Meetings, Incentives, Conferences, Exhibitions)

· Venue sourcing, logistics, catering, AV equipment, speaker services

📦 Office Supplies & Equipment

· Workstations, printers, stationery, employee hardware

👨⚖️ Professional Services

· Legal, audit, consulting, insurance, recruitment

🧠 HR & Learning

· Learning platforms, training providers, well-being services

Each of these categories benefits from a focused procurement strategy—one that balances cost, quality, risk, and supplier collaboration.

Why Indirect Procurement Is a Strategic Priority

Traditionally seen as tactical, indirect procurement now plays a strategic role in business transformation. Leading organizations recognize that optimizing this spend can lead to:

· Significant cost savings

· Process efficiency gains

· Stronger supplier relationships

· Enhanced risk management

· Accelerated sustainability efforts

According to Deloitte’s Global CPO Survey, indirect spend can account for up to 50% of total corporate spend, depending on the industry.

Top Challenges in Indirect Procurement

Despite its importance, managing indirect procurement is uniquely challenging:

🔄 Decentralized Purchasing

Departments often purchase independently, resulting in lost savings and inconsistent supplier terms.

📊 Deloitte reports that over 65% of CPOs cite indirect spend as “highly decentralized.”

🔍 Lack of Spend Visibility

Data silos across functions make it difficult to track and analyze indirect spend effectively.

❌ Maverick Spend

Uncontrolled, off-contract purchasing reduces compliance and exposes the business to risk.

🧩 Supplier Fragmentation

Too many suppliers in the same category reduce negotiation power and create inefficiencies.

📈 The Hackett Group found high-performing companies had 34% fewer suppliers in key indirect categories.

📉 Difficult ROI Measurement

Intangible categories like marketing or consulting often lack clear ROI, making it harder to optimize.

Best Practices: Building a Strong Indirect Procurement Strategy

✅ 1. Adopt Category Management

Group indirect spend into logical categories (e.g., MRO, travel, IT) and assign dedicated managers. This enables deeper market knowledge, better supplier consolidation, and stronger cost control.

✅ 2. Centralize or Standardize Processes

Unify indirect procurement across the business with clear policies, workflows, and governance. A centralized model helps gain spend visibility and enforces contract compliance.

✅ 3. Invest in Procurement Technology

Leverage eProcurement platforms, contract lifecycle tools, and spend analytics to streamline sourcing and enhance decision-making.

✅ 4. Engage Stakeholders Early

Collaborate with business units like IT, HR, and marketing to ensure procurement solutions meet real needs and drive adoption.

✅ 5. Track KPIs & Improve Continuously

Use metrics such as cost savings, supplier performance, and contract utilization to guide improvement efforts.

✅ 6. Align with Broader Business Strategy

Indirect procurement should support larger company goals—such as digital transformation, employee enablement, and ESG compliance.

Indirect Procurement as a Value Driver

When aligned with company objectives, indirect procurement becomes a bridge between departments, enabling:

· Faster innovation adoption

· Operational resilience

· Efficient cost allocation

· Better stakeholder satisfaction

· Measurable ESG performance

Far from being a background function, indirect procurement now has the potential to deliver strategic value across the enterprise.

Conclusion

As indirect procurement continues to grow in complexity and impact, procurement leaders must shift from reactive management to strategic ownership. That means building a clear procurement strategy, applying structured category management, and investing in the right tools and talent.