Indirect spend
What a company buys to run itself rather than to build its product: energy, IT, facilities, maintenance supplies, services and travel.
Also called: Indirect procurement, Non-production purchasing, G&A spend
Indirect spend covers everything that does not end up in the product. Electricity for the plant, laptops, cleaning contracts, safety gloves, the agency that built the website, the forklift lease.
It is usually spread across many more suppliers than direct spend and many more people inside the company. A plant of 300 people can easily have 1,500 indirect suppliers, half of them used once a year.
How it is managed
Indirect categories are mostly bought on price and service level, from catalogues and framework contracts. Spend analytics, tail-spend programmes and purchasing cards do most of the work. The specifications are rarely complicated: a box of nitrile gloves is a box of nitrile gloves.
That is the main contrast with direct spend, where the specification is the hard part and the price is mostly a consequence of it.
The grey zone
Some lines sit in between. MRO parts (maintenance, repair and operations) such as spare bearings or replacement motors look indirect on the books, but they have part numbers, drawings and the same duplication problems as production parts. Packaging is another one: direct if it ships with the product, indirect if it only moves parts inside the plant.