Direct and indirect procurement are often viewed differently within organisations. Direct procurement is typically associated with production, revenue generation, and supply chain continuity, making it highly visible to senior leaders. Indirect procurement, by contrast, often operates behind the scenes. This can create the perception that direct procurement is more important. However, while the two functions serve different purposes, both play a critical role in organisational success. Understanding how direct and indirect procurement contribute to business performance can help organisations make more strategic procurement decisions.
Is One Really More Important Than the Other?
Ask a group of procurement professionals whether direct procurement is more important than indirect procurement and you’ll likely receive a range of opinions.
The argument in favour of direct procurement is easy to understand. Without raw materials, components, or essential supplies, production can grind to a halt. Customers may face delays, revenue can be impacted, and supply chain disruptions can quickly become a board-level concern.
But does that mean indirect procurement is less important? Not necessarily.
While direct procurement is closely linked to the products and services an organisation delivers, indirect procurement provides the support, infrastructure, and services that allow the business to operate effectively. Rather than competing functions, direct and indirect procurement work together to create value and support organisational objectives.
Why Direct Procurement Gets More Attention
Direct procurement refers to the acquisition of goods and materials that contribute directly to the creation of a product or service. This includes items such as raw materials, components, packaging, and manufacturing supplies.
Because these purchases are directly linked to revenue generation, they often receive greater visibility within organisations. If a critical supplier fails to deliver, the consequences can be immediate. Production schedules may be disrupted, customer orders delayed, and sales opportunities lost.
Recent supply chain challenges have further highlighted the importance of direct procurement. Organisations have had to navigate shortages, geopolitical uncertainty, transportation disruptions, and rising costs. As a result, procurement teams responsible for securing essential supplies have become increasingly important to business continuity.
This visibility often leads to the perception that direct procurement delivers the greatest value.
The Often Overlooked Value of Indirect Procurement
Indirect procurement focuses on purchasing goods and services that support business operations but do not directly form part of the end product. Examples include technology, software, marketing services, facilities management, professional services, travel, and utilities.
Although these purchases may not generate revenue directly, they enable employees and departments to perform effectively. Without the right systems, services, and support infrastructure, organisations can struggle to operate efficiently.
The challenge is that the value created by indirect procurement is often less visible. A production stoppage caused by a missing component is easy to identify. The impact of poorly managed software contracts, inefficient service providers, or fragmented supplier relationships can be much harder to see.
However, these issues can significantly increase costs and reduce organisational performance over time.
Indirect procurement also plays a crucial role in supporting digital transformation, sustainability initiatives, and business improvement programmes. In many organisations, indirect procurement teams are responsible for sourcing the technologies and services that enable long-term growth and innovation.
Different Functions, Shared Goals
Direct and indirect procurement may focus on different categories of spend, but they ultimately share the same objective: creating value for the organisation.
Direct procurement helps ensure products can be manufactured and delivered to customers. Indirect procurement helps ensure the organisation has the resources, systems, and services required to operate efficiently.
Both functions contribute to:
- Cost management
- Supplier relationship management
- Risk reduction
- Business performance
- Organisational resilience
The difference lies in how that value is delivered.
Direct procurement often creates visible value through production continuity and supply chain performance. Indirect procurement frequently delivers value through efficiency improvements, cost avoidance, governance, and operational effectiveness.
Why Organisations Need Both
Rather than debating which function is more important, organisations should focus on how direct and indirect procurement work together.
A manufacturer may have access to every raw material required to produce its products, but without IT systems, professional services, facilities management, and other support functions, the business would struggle to operate.
Equally, having excellent support services means little if production cannot continue because essential materials are unavailable.
The most successful organisations recognise that procurement extends beyond purchasing goods and services. It is a strategic function that helps balance cost, value, risk, and performance across the business. Both direct and indirect procurement contribute to that objective.
The perception that direct procurement is more important than indirect procurement often comes down to visibility. The impact of direct procurement decisions is usually immediate and easy to measure, while the benefits of indirect procurement can be more gradual and less obvious. However, both functions are essential.
Direct procurement supports production, customer delivery, and revenue generation. Indirect procurement supports the people, processes, and systems that keep the organisation running efficiently. Rather than viewing one as more important than the other, organisations should recognise the unique value each function brings. When direct and indirect procurement work together effectively, businesses are better positioned to improve performance, manage risk, and achieve long-term success.
Understanding how procurement creates value across an organisation is a key skill for today’s procurement professionals.
Whether you’re involved in strategic sourcing, supplier management, contract negotiation, or procurement leadership, our CIPS qualifications can help you develop the knowledge and confidence to make a greater impact within your organisation.