What is meant by Indirect Purchasing

Strategic purchasing is divided into two areas in many companies. The one are of direct purchasing looks after materials that are directly integrated into the end products via parts lists or the formulation. These components and product groups are called “directs” or “production material.” It composes approx. 60%-80% of a producing company’s purchasing volume.

The other area of indirect purchasing is responsible for the procurement of “non-production materials” (NPM) and services. This includes, for example, purchasing categories such as marketing, information technology, consultation services and cleaning services, as well as maintenance supplies or so-called MRO items (maintenance, repair, operations). These very heterogeneous product groups make up the remaining 40% to 20% of the procurement volume and are often referred to as “indirects.”

The designation, indirect purchasing, is also derived from this term. It is subject to very different demands and challenges than direct purchasing. There are only a few materials or components relevant to indirect purchasing, so that the share of repeatable demands is rather low. Analyses and cost savings measurements that are based on amounts and corresponding prices are thereby rarely applied in indirect purchasing. In reality, spend transparency is much more in the foreground.

For every indirect product group or purchasing category, all purchasing vouchers (invoice items, order items) must be matched (or classified) within the scope of content management. This is the only way that the lead buyers can obtain the baseline key figures, which help him to define procurement strategies, carry out negotiations successfully, etc., from the indirect categories. Software that automatically executes classifications for the indirects and sees to transparency is, for example, the DataCategorizer by Orpheus.

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