Direct vs. indirect procurement: Key differences and strategies

Direct and indirect procurement are two sides of the same coin. Most organizations need both types of procurement to keep their operations running smoothly, but procurement strategies can look quite different for direct versus indirect procurement. As a result, each presents unique challenges.

As a procurement leader, you focus on balancing cost, efficiency, and compliance across both indirect and direct spending. Yet to do so, you need spend visibility and real-time data. 

The 2025 State of Procurement Data Report found that 64 percent of procurement decision-makers list data as a top priority. Data insights tell you what your organization needs from its procurement management and the challenges you might face. Only then can you craft an efficient, resilient, and effective procurement strategy.

What is direct vs. indirect procurement?

Direct procurement is the acquisition of goods or services to create an organization’s final product. This includes raw materials, ingredients, and packaging.

On the other hand, indirect procurement is the process of acquiring goods or services that keep internal day-to-day operations running smoothly. Items like office supplies or IT services land in this category.

Some organizations break down indirect spend into subcategories based on their business needs. For example, maintenance, repair, and operations indirect procurement focuses solely on the necessary goods to maintain and repair equipment. 

However, the two procurement types have more distinctions that impact how you run operations for each.

Key differences between direct and indirect procurement

At a high level, direct and indirect procurement follow roughly the same process. But if you dig into the specifics, you’ll find stark differences that make these two types of procurement distinct. Here are some of them:

• Operational complexity: With indirect procurement, you need a wider range of items, so teams will order the goods they need on their timeline. However, because direct procurement focuses on raw materials, you’ll have fewer vendors, fewer orders, and more control over what and how you order. 
• Supplier relationship management: Indirect spend covers a range of goods, so you’ll end up working with several types of vendors—but building solid vendor partnerships can be challenging as a result. Direct procurement, on the other hand, uses specific supplies from fewer vendors, which makes it easier to build long-lasting vendor partnerships.
• Forecasting: Raw material shortages or global supply chain shifts can dramatically impact your direct procurement process. However, with indirect procurement, buyers purchase the same items on a fairly regular basis, so spend is easier to track. 
• Inventory management: With indirect procurement, your inventory doesn’t tend to change—restocking printer paper or outsourcing hiring is fairly constant. However, direct procurement processes see more hurdles around market shifts and consumer demand changes.
• Internal purchasing policy compliance: You’re more likely to have a procurement team that handles direct procurement and purchases within your organization’s policy limits. But indirect procurement is team-based, so maintaining compliance with internal purchasing rules may prove more difficult. 
• Cost management and control: An optimized direct procurement process is a tight-knit system of vendors and routes that’s fairly straightforward to manage. However, with indirect procurement, teams purchase on their own on an as-needed basis, which can make finding the most cost-effective options more challenging.

Not all organizations need both direct and indirect procurement. For example, a school district that orders classroom supplies or hires cleaning services only requires indirect purchases. But no matter your primary procurement type, it’s helpful to know their challenges and solutions. 

Challenges and solutions in direct procurement

Anything you acquire via direct procurement is crucial for producing sellable goods that drive revenue for your organization. Here are some challenges you may face with this procurement type:

• Supply chain disruptions: If part of your supply chain stops or experiences massive delays, the interruption can threaten your production process.

• Quality control: To create a high-quality product, you must start with high-quality materials or ingredients—but sourcing these can be difficult. 

• Supplier relationships: You rely on suppliers to deliver raw materials so you can make goods to sell. That’s why it’s crucial to strategically source the right vendor for you.

• Compliance and policy enforcement: Industry regulations, trade laws, and taxes can change without warning, so you’ll need to monitor them and adapt to any shifts.

• Cost optimization: Without a way to monitor and predict supply chain networks and costs, it’s nearly impossible to manage your spending accurately. 

These challenges stem from two main problems: a lack of visibility and control. 

Visibility gives you a bird’s-eye view of your operations—a level of transparency that only good data can provide. Metrics from your procurement functions spotlight areas where improvements can boost operational efficiency and fix the challenges we’ve named here. More visibility also translates into more control over your supply chain, costs, and workflows.

Challenges and solutions in indirect procurement

Indirect procurement keeps your internal workflows moving. After all, without laptops, staplers, or the like, your employees can’t do their jobs. 

Let’s take a closer look at the potential challenges of creating an indirect procurement strategy:

• Lack of spend visibility: Each team handles its own indirect procurement, so having sufficient financial visibility is nearly impossible if you don’t centralize spending data across your organization. 
• Rogue spend and cost control: If a buyer doesn’t know which vendors you’ve approved and which are off-limits, they’re more likely to purchase from uncontracted vendors, which increases organizational rogue spend.
• Scattered procurement data: Every time a buyer places an order, the action creates valuable procurement data. But that scattered data isn’t helpful if you can’t consolidate, organize, and analyze it. 
• Compliance regulations: You have to take extra steps to help your buyers purchase from the right vendors. That means communicating your organization’s rules and updating stakeholders if those rules change.
• Supply chain optimization: Building solid supply chain management is far more difficult when each team needs to purchase different items from specialized suppliers since this increases the number of orders to coordinate. 

The challenges we’ve outlined here largely stem from decentralization. By its nature, indirect purchasing involves having multiple orders and vendors to track—so it’s all the more important to have a go-to place to see everything that’s happening across your network. 

Strategies for optimizing direct and indirect procurement processes

After establishing reliable workflows that give you the data you need, your next step is putting it to work. Follow these five simple steps to optimize your direct and indirect procurement processes with analytics:

1. Assess your current procurement spend and vendor performance

The first step is to examine your procurement spending and supplier performance as they stand now. To do so, run a spend analysis and vendor performance audit.

When you drill down into supplier performance, look for order accuracy, communication on any delays, and how long it takes vendors to take action after they receive a purchase order (PO). It’s also worth considering whether your current suppliers are the best for your supply chain.

Afterward, use these audits as your foundation for the next steps in this process.

2. Develop direct and indirect procurement policies

Your internal direct and indirect procurement policies determine how, when, and from whom buyers make purchases. These rules are an essential part of your risk management strategy. 

But if a buyer doesn’t recognize approved vendors from ones to avoid, the risk of rogue spend can skyrocket. Not only do you need clear and concise procurement policies, but you also need a reliable means to communicate them. 

Start by publishing your procurement guidelines in a central location so anyone can find the information. Next, set up a way to communicate if these policies change. That way, you keep everyone in the loop.

3. Set and track direct and indirect procurement KPIs

With a foundation of procurement analytics, you now have insight into the areas of your operations that need fine-tuning. But you also need goalposts to measure their improvement over time—which means establishing your procurement metrics.

The direct and indirect procurement key performance indicators (KPIs) you choose should match the steps you’ve taken to control and streamline your operations. As a tip from our team to yours, go with a procurement solution that gives you custom spend reporting and insights based on your buying habits. That way, you get the most useful metrics to help you hit your goals.

4. Leverage digital procurement and automation tools

Not only does a digitized procurement solution open the door for faster processes, but it also fosters more accurate workflows. You can lean on e-procurement solutions to streamline the whole process, automate routine tasks, and free up your time to focus on other parts of the business.

Additionally, digital procurement processes allow you to take full advantage of everything that robust technology offers. For example, you may use blockchain technology to get real-time data on each order for greater cost control, or you might roll out AI to analyze your data against the global supply chain to make your operations more efficient. 

In short, a pivot to digital procurement and automation tools paves the ways for more cost-saving opportunities and faster processes. 

5. Implement cost control and compliance measures

The final step is making changes based on your existing data set and procurement policies. With more control over your operations, you’ll be able to:

• Create accurate budgets
• Find opportunities for cost savings
• Fix supply chain inefficiencies
• Streamline internal approval processes
• Monitor market trends

By establishing cost control and compliance measures for your entire organization, you can create a solid foundation for day-to-day operations—one that encourages consistency, accuracy, and visibility. More reliable insight into your network equals better opportunities to save money and avoid interruptions.

Leveraging technology to balance procurement activities

So far, we’ve touched on how technology is an asset for your direct and indirect procurement. But it’s also worth looking at how a comprehensive procurement solution simplifies the process: 

• Automatic routine tasks: Save time by automating daily tasks like purchase requisition approvals and PO creation. 
• Real-time data analytics: Get your data in real time to feel confident you’re making data-driven decisions for your team and organization. 
• Supply chain forecasting: See how global supply chain shifts could trickle down to impact your network and take steps to avoid possible disruptions. 
• Network data centralization: Pull data from across your entire operations into one place for an accurate bird’s-eye view. 
• Strategic sourcing: Find the best vendor for your procurement needs at any given moment to ensure high-quality service and cost savings. 

The right procurement software can transform your operations and grant you full control over your costs, supply chain, and vendor relationships. 

How Amazon Business supports direct and indirect procurement

Amazon Business strives to make direct and indirect procurement as seamless and straightforward as possible. Here’s how:

• Workflow automation: Use features like Guided Buying, Manage Your Delivery, and others to automate routine procurement tasks based on the parameters you set.
• Spend insights: Analyze how you spend money today to find cost-saving opportunities and accurately plan every purchase.
• Customizable systems integrations: Choose which systems you want to connect with your existing workflows to create the process that works best for your team.
• Bulk buying: Get valuable discounts on bulk orders to help with inventory management and control costs.
• Flexible payment options: Pay invoices in whatever style works for you—such as with our Pay by Invoice feature or bank-issued credit cards.

Amazon Business is the one solution you need to cover both types of procurement for your organization.

Streamline your direct and indirect procurement with Amazon Business

The right procurement solution keeps your indirect and direct procurement operations running and centralizes data from across your supply chain. That way, you can build a procurement strategy based on accurate information.

Amazon Business focuses on finding innovative ways to support your procurement process. Whether it’s by automating day-to-day tasks or organizing real-time spend analytics so you can make effective purchasing decisions, our solution helps you uncover more ways to boost your profit margins.