![]() However, the decentralized strategy can lead to murky approvals and confusing reports, while a centralized procurement team can lead to too specialized processing that leads to confusion in the company as a whole. ![]() In the past, many companies relied on a centralized direct procurement team and a decentralized indirect procurement strategy. For indirect spend vendors, you will need to pay attention to other elements like customer service, ROI, and how easy it is to get users to adopt it. For example, for vendors who provide goods needed for products (direct spend), you’ll want to take note of their ability to be on time, quality of product, and accurate invoicing. The way you measure the effectiveness of direct or indirect procurement will differ because of their separate objectives. With indirect procurement, purchases are only made when they’re needed, limiting the need for inventory management. So the direct procurement team has to account for a healthy inventory management strategy, whereas indirect procurement is entirely structured by demand. ![]() Inventory managementĪs you’d imagine, direct procurement deals with physical products, and physical products need to be kept in stock. ![]() While with indirect spend, their focus is on spend management more than on managing supplier relationships: it’s much more about controlling costs than building relationships. With direct spend, procurement has traditionally spent its energy building and maintaining relationships with the company’s suppliers. With a tighter grasp on these concepts, spend activities can be streamlined and optimized accordingly. Knowing the difference between direct and indirect spending informs more than just your financial strategy - it impacts all of your spend activities across the board. Here are some examples of indirect spend:
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