Know more about indirect and direct procurement
The concept of procurement strategy started in 1980’s when organizations were trying to manage their fuel costs. Online procurement system integrates purchasing management with supply management. It was identified that purchasing is a strategic implementation in an organization and not a strategic plan in supply management process. Before this identification organizations considered procurement to be a part of supply management process.
Procurement can be divided to two categories, namely: direct procurement and indirect procurement.
Direct Procurement
Direct procurement refers to the work which acquires raw materials and goods for production. This means purchasing goods in large quantities and they are acquired from a pool of suppliers to get the best price in the market. Direct procurement deals with purchases which are made frequently and are required to keep the business running. It has been observed that once direct procurement stops functioning or malfunctions, organization finds it difficult to produce their products. Direct procurement exists in manufacturing sectors.
Indirect Procurement
Indirect procurement refers to purchasing services and supplies that help keep businesses on the run. It involves buying of repairing equipment, office supplies, and hiring services related to marketing. It would be difficult to run a business without indirect procurement and it closely contributes to a large part of a company’s total expenditure.
Indirect procurement can be divided two categories:
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Operations Resource Management (ORM)
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Maintenance Repair and Operations (MRO)
The categories were divided by software companies to organize the procurement process through software.
Use online procurement system to handle the procurement cycle in your organization, to accelerate and automates your entire procure-to-pay cycle. With this software you can manage day-to-day purchasing and gain control over spend.
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