Well to start off, every purchasing decision involves considerations such as marginal benefit, handling and delivery. A well-structured procurement function provides better buying decisions, saving tremendous costs without compromising on quality.
Thus procurement is a process that is split into two categories: the first one is known as direct and the second one is known as indirect spend. Direct spend refers to the procurement of the finished products such as the parts, components and raw materials. While indirect procurement refers to the non-production related acquisition like the acquisition sources to enable operation.
Furthermore indirect spend involves a variety of services and goods which range from items like office supplies to costly equipment like heavy machinery.
|Direct Procurement||Indirect Procurement|
|Inputs||Production goods and raw materials||Supplies, outsourcing, repair and maintenance||Services and capital goods|
|Value||According to the industry norms||Low Value||High Value|
|Nature||Follows operational method||Follows tactical method||Follows strategic method|
|Examples||Involves the petroleum industry precisely crude oil||Spare parts and lubricants||Storage facilities like the crude oil|