What is indirect purchase?
Indirect purchase is defined as any purchase that is not related to the company's core products or services. These items are typically acquired for use in the business's day-to-day operations, such as office supplies, cleaning materials, computer equipment, travel expenses, and marketing materials.
While indirect purchasing may seem like a small part of the overall supply chain, it can still account for a significant portion of a company's total spending. As a result, the procurement team is responsible for ensuring the business purchases the correct products at the best price possible.
Planning a procurement strategy
Following these steps can help to improve a company's bottom line by reducing spending on indirect purchases.
There are several steps, including:
- identifying the need
- researching a supplier
- negotiating the contract, and
- placing the order
Factors to consider
There are several factors to consider to ensure long-term success of an indirect purchasing strategy
- It is essential to align the strategy with the overall business goals and objectives.
- You will need to have a purchase order system in place. This will help you to keep track of what has been ordered and prevent duplication of orders.
- Building solid relationships with suppliers is important, as this will help to negotiate better prices and terms.
- The procurement team must have a good understanding of the company's overall spending patterns and priorities.
- Businesses must carefully consider the quality of products or services they will source indirectly. Indirect purchasing may not be suitable for items that are needed quickly or in small quantities, as a minimum order is often required.
- Finally, it is important to monitor the strategy's performance regularly and make adjustments where necessary.
By considering these factors, the procurement team can develop an effective indirect purchasing strategy that meets the company's needs.