The way that you buy has just as much to do with your success in business as what and how much you buy for. You must understand the difference between direct procurement and indirect procurement in order to move your business forward.
What is Direct Procurement?
Direct procurement focuses on volume-based purchases of raw materials. These purchases directly affect the revenue stream of a business, and the volume orders allow the company to acquire resources at cheaper prices. Companies that look ahead can save money and lock in lower rates for raw materials using direct procurement.
What is Indirect Procurement?
Indirect procurement focuses on service based purchases that allow for the daily operation of business. These purchases are more singular in nature and have less to do with revenue than with operations and administration.
An Example of the Difference
For instance, while a direct procurement may involve purchasing palettes of steel and copper to manufacture computer chips, indirect procurement is more along the lines of outsourcing an air conditioning repair to the local HVAC company once every six months.
Which Type of Procurement is More Important?
Without direct procurement, a company will not produce the revenue that allows it to buy indirect procurement services. Although the company in the above example may find the office uncomfortable without AC for a few months, prioritizing AC over the steel and copper limits the company's ability to ever make the AC repair.
Please contact us when you are ready to buy direct and save. We offer direct procurement opportunities to help your business longevity.