2 Types of Procurement
Direct Procurement is the purchase of the input that a business needs to acquire in order to manufacture its comprehensive products. It can be the raw material that is usually required for manufacturing-related business. The input cost and efficiency of direct procurement is a vital factor in the profitability and performance of the company. When there is a block in the process of direct procurement, it affects the capability of the company to produce its stuff.
Indirect Procurement is the procurement of the services or input that are indirectly used in the manufacture of the company’s goods but are important for the day-to-day processes and operations. It could include office supplies or maintenance services for the equipment that is being used for manufacturing.
There are some instances to get apprehension of 2 types of procurement.
- Direct Procurement examples:
- Products for resale.
- Raw materials.
- Ingredients for food products.
2. Indirect Procurement examples:
- Travel expenses.
- Computer and office hardware.
- Maintenance costs.
- Employee management and development costs.
- Consultants and professional services.
- Specialized software.
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