What are the examples of direct and indirect procurement?

Direct procurement is the process of purchasing goods and services that are essential for the production process of a company’s final product. These items could include raw materials, components, or services that will help create a finished product that could be sold to a customer.

The examples of direct procurement in manufacturing are raw ingredients, automobile spare parts, apparel fabrics, dyes, and any packaging materials required to get the product done. When it comes to construction, it could be anything from bricks and cement to plumbing fixtures and electrical wiring services.

In the case of software development, direct procurement could be made for specialized software libraries, API license keys, or computing infrastructure that must be integrated into the finished product.

However, indirect procurement involves the purchase of goods and services that are critical for the day-to-day operations of an organization, although they don’t become a part of the final product or service sold by them.

Examples of indirect procurement could be facility management services, marketing and sales outsourcing operations, office supplies, IT equipment, utilities, software subscriptions or licenses for internal business operations, training programs, employee benefits, and professional consulting services, which clearly highlight the difference in direct vs indirect procurement.