Indirect Procurement is referred to by many different names. It might be called Non-Production Procurement or MRO for instance. The very labels applied to these names (ie. “Indirect” or “Non”-Production) implies some lesser level of importance. But nothing could be further from the truth.
The procurement of Indirect goods and services encompasses virtually every aspect of your company. The scope of Indirect Procurement includes areas such as I/T, Capital expenditures, Freight and Logistics, Facilities, Marketing, Legal and Human Resources, Outsourcing contracts, Marketing, Utilities, Consumables, Temporary Labour, and Travel.
Failure to negotiate good contractual rates and terms and conditions across these areas can have a tremendous and immediate impact on a company’s financial and operating performance. Further failure Indirect goods and services suppliers to deliver on their promise can bring a company to its knees. And failure to put in the necessary controls to manage the entire procurement, governance, and supplier management process can jeopardize a company’s ability to remain viable.
The ability to negotiate great rates and terms can make a significant improvement to a company’s profitability and cash flow. It can provide a source of competitive differentiation. And it can enable improved productivity in both direct and indirect functions.
Indirect Procurement is critically important in any company.
So why is it an area that receives less focus and attention?