Indirect procurement: Definition, categories, and best practices

Indirect procurement covers everything your organization buys that doesn't go into the products or services you sell: office supplies, software subscriptions, marketing services, travel, IT infrastructure, and more. Procurement teams are under pressure to manage this spend more rigorously. 

Managing indirect spend well requires strategy, not just process. Without visibility into what's being purchased, by whom, and from which suppliers, procurement teams can't negotiate effectively, enforce policy, or demonstrate ROI. A data-driven approach to indirect procurement gives organizations the control they need to reduce costs, reduce risk, and improve compliance across all 10 indirect spend categories.

Key takeaways

• Indirect procurement covers 10 major spend categories and typically accounts for 15–40% of a company's total expenses.

• The biggest risks in indirect procurement are maverick spending, supplier fragmentation, and lack of spend visibility, all of which are addressable with the right policies and tools.

• The difference between direct and indirect procurement is whether the purchase contributes to a sellable product—indirect spend supports operations but doesn't end up in the final product.

   

What is indirect procurement?

Indirect procurement is the purchasing of goods and services that support an organization's operations but don't directly contribute to its final products or services. This includes everything from office supplies and software licenses to facilities management and professional services.

Because indirect spend is spread across departments, locations, and categories, it's often more fragmented and harder to control than direct procurement. That fragmentation is exactly what makes it worth managing strategically.

Direct vs. indirect procurement

Direct procurement is the purchasing of raw materials, components, or goods that go directly into a company's products or services. It has a direct impact on cost of goods sold and is typically managed by supply chain or manufacturing teams.

Indirect procurement covers everything else: the operational inputs that support the business but don't become part of what you sell. Supply chain teams own direct procurement; procurement, finance, or individual departments typically manage indirect spend. Understanding both sides of this split is the starting point for any spend management strategy.

Categories of indirect procurement

Most indirect procurement falls into 10 primary categories. Understanding what's in each helps procurement teams categorize spend, identify consolidation opportunities, and apply the right sourcing strategy.

1. Office supplies and equipment

Items required for daily employee operations: printer paper, writing materials, furniture, monitors, keyboards. Often the highest-volume category by transaction count, though lower in individual transaction value. A leading area for tail spend consolidation.

2. Software and communications

Software subscriptions, communication platforms, productivity tools, and contract lifecycle management systems. This category has grown significantly with remote work; shadow IT (employees purchasing unapproved software) is a major maverick spend risk here.

3. IT infrastructure and managed services

Servers, cloud infrastructure, managed IT services, hardware maintenance contracts, and cybersecurity services. Often the highest-value category in the indirect portfolio and requires close collaboration with the IT team.

4. Marketing and advertising

Outsourced marketing services, agency retainers, paid media, event sponsorships, and brand production. This category is typically managed by marketing rather than procurement, creating a visibility gap for finance teams.

5. Travel and events

Corporate travel (airfare, hotels, ground transport), conference attendance, offsites, and employee relocation. One of the most fragmented indirect categories: employees often book individually, creating high maverick spend risk and limited negotiating leverage.

6. Facilities management and maintenance

Utilities, janitorial services, building maintenance, security, and outsourced facilities management. Scope varies significantly by whether the organization owns or leases its real estate.

7. Professional services

Legal, accounting, consulting, and advisory services. High value per engagement, often contracted project by project. Difficult to standardize, but spend concentration analysis can identify consolidation opportunities.

8. HR and workforce management

Recruiting, staffing agencies, employee training and development, benefits administration, and HR technology platforms. Closely tied to headcount planning; indirect procurement teams often co-manage with HR.

9. Financial services and insurance

Corporate insurance, financial advisory services, banking fees, and treasury management tools. Typically handled by finance, but procurement should be included in vendor selection and contract negotiation.

10. Fleet and transportation management

Company vehicles, fleet maintenance, fuel programs, and logistics services that support internal operations (not direct delivery of goods to customers). Applies primarily to field-service or multi-site organizations.

Challenges in managed indirect procurement

Procurement teams that are responsible for managing indirect procurement may face challenges throughout the entire procurement process. Here are a few of them:

Visibility and control

A team might order writing materials from one vendor, printer ink from a second, and keyboards from a third. If you multiply the number of vendors this team uses by every procurement team in your organization, you’ll see that your buyers deal with an intimidating number of suppliers and corresponding documentation.

Additionally, mismanaged indirect procurement increases the risk of contract leakage. If a buyer makes a quick in-the-moment purchase from their personal account, they may want to request a reimbursement from their employer, even if they purchased from a contracted buyer with a negotiated price in place. This purchase from a personal account isn’t part of the contract, creating a purchasing control challenge for your organization. 

It’s likely that these teams have overlapping supply needs, but without visibility into spend, they won’t discover consolidation opportunities and will continue to overspend. As a result, controlling costs will become more difficult. 

Maverick spending

Maverick spending, purchases made outside of approved contracts and channels, is the single biggest cost driver in indirect procurement. 

When employees bypass procurement to buy from unapproved suppliers or on personal accounts, organizations lose the negotiated pricing, volume discounts, and compliance protections their contracts provide.

The causes are usually practical: the approved channel is harder to use than the alternative, or employees don't know a preferred supplier exists. Strategic sourcing and e-procurement tools reduce maverick spend by making the compliant path the easier path.

Supplier fragmentation

An efficient procurement process uses a small number of vendors to move materials from end to end. However, supplier fragmentation occurs when companies use multiple disconnected providers. Indirect procurement processes have a higher risk of vendor fragmentation because they require sourcing from several suppliers.

Fragmented suppliers can make your supply chain less sustainable. Multiple suppliers means more individual purchases, so you’ll end up with several smaller orders instead of a few large ones. Even if your organization takes steps toward more sustainable business practices, ensuring your suppliers have the same priorities is difficult.

Compliance and risk management

Decentralized procurement increases the risk of regulatory violations. When employees can’t access the information they need to make compliant purchases, they’re more likely to purchase unapproved supplies from non-contracted vendors. 

Additionally, without centralized procurement, maintaining a comprehensive risk management strategy becomes more challenging. Procurement teams don’t have complete insight into their operations if their software and databases are disjointed, so it’ll be more difficult to spot and address vulnerabilities. 

You can get a big-picture understanding by organizing indirect spend into the above five categories. However, it’s crucial to drill down into the specific items in each since this line-item view of your purchases can prove an impactful insight for strategic sourcing. 

Strategic sourcing involves optimizing the suppliers you work with to consolidate orders, uncover better deals, and reduce risk. This strategy helps you avoid wasted spend and efficiently manage indirect procurement.

The consequences of mismanaged indirect procurement

If a company doesn’t manage its indirect procurement challenges effectively, these problems can evolve into more significant organizational setbacks. 

Companies experience these consequences most often: 

• Budget overruns: Poorly coordinated indirect procurement makes cost management difficult and increases the odds of going over budget

• Reduced efficiency: Without automation, exchanging documents between buyers and vendors and managing internal workflows takes longer

• Operational bottlenecks and delays: Manual approval processes can’t keep up with the workflows and paperwork from several vendors, resulting in operational delays

• Compliance risks: Regulatory violations may result in fines and can harm your organization's reputation in the industry, making it harder to find quality suppliers

• Less supplier reliability: Without insight into your supplier’s performance or supply chain, you have less understanding of their ability and resources to meet your needs

• Disjointed supply chain: A disorganized supply chain makes it more challenging to monitor spend and control costs, which inevitably leads to overspending

• Vulnerable to disruptions: Mismanaged indirect procurement can make it harder for teams to identify risk areas and mitigate supply chain disruptions

Operationalizing indirect spending is vital for maintaining smooth internal operations—but mismanaged indirect procurement can make it harder for employees to do their jobs. Your company can avoid these setbacks by implementing indirect procurement best practices. 

Indirect procurement KPIs

Tracking the right KPIs gives procurement teams a clear picture of where indirect spend is under control and where it isn't.

1. Spend under management (%): The percentage of total indirect spend actively managed through approved procurement processes. A low score signals significant unmanaged spend.
2. Maverick spend rate (%): The share of indirect spend occurring outside approved contracts or channels. The inverse of contract compliance rate.
3. Supplier consolidation ratio: The number of suppliers used for a given category. Fewer suppliers generally means more leverage and lower management cost.
4. Purchase order (PO) cycle time: The average time from purchase requisition to approved PO. A long cycle time is often a signal of process bottlenecks that drive employees to bypass procurement.
5. Contract compliance rate (%): The share of purchases made against negotiated contracts. Track this alongside maverick spend rate to understand where policy gaps exist.
6. Cost savings vs. budget: Actual procurement savings relative to planned targets. Useful for demonstrating procurement's financial contribution to the business.
7. Supplier on-time delivery rate (%): The percentage of indirect orders fulfilled by the supplier's committed date. Even for non-production categories, delivery reliability affects operations.
8. Tail spend as % of total indirect spend: The share of indirect spend attributed to a high volume of low-value transactions. High tail spend usually signals fragmentation that consolidation or catalog buying can address.
    

Amazon Business makes managing indirect spend even easier with a wide selection of products, fast shipping, and transparent guardrails. Further, Amazon Business Analytics offers spend tracking, trends analysis, and customizable reports, so teams can track KPIs in one view instead of aggregating manually. 

Best practices for effective indirect procurement

These indirect procurement best practices hinge on creating operational transparency and data-driven decisions. You can leverage these strategies to make impactful procurement decisions:

Establish clear policies and procedures

A procurement strategy for indirect spend starts with policy: which suppliers are approved, who can make purchasing decisions, what thresholds require competitive bidding, and how contracts are managed. Policies only work if they're accessible and easy to follow. 

Amazon Business makes it easy to drive compliance across your organization with a variety of tools and policies a more streamlined purchasing experience.

Conduct regular spend analysis

Spend analysis is how procurement identifies where consolidation opportunities exist, where maverick spend is concentrated, and where contract renegotiations are warranted. A quarterly or semi-annual review of indirect spend by category, supplier, and department gives procurement teams the data to make better decisions and the evidence to drive compliance conversations.

Consolidate suppliers where possible

Reducing the number of suppliers in fragmented categories improves negotiating leverage, lowers administrative overhead, and makes spend tracking more reliable. Start with the categories with the most suppliers and lowest strategic differentiation. Office supplies, travel, and software subscriptions are often the best candidates.

Implement e-procurement tools

Deloitte found that 92% of CPOs are planning or assessing generative AI capabilities, indicating that automation is now a baseline expectation in indirect procurement, not a competitive edge. 

E-procurement tools reduce PO cycle time, enforce purchasing policy at the point of purchase, and provide the spend visibility that manual processes can't. Amazon Business integrates with 200+ e-procurement systems, so procurement teams can extend policy controls to purchasing already happening in existing platforms.

Compliance and risk management

Risk management in indirect procurement means monitoring suppliers for financial health, data security practices, labor compliance, and contractual adherence. Many indirect supplier risks go undetected until they create an operational problem. Regular supplier reviews, contract renewals with updated terms, and clear escalation processes reduce the probability of a supplier failure creating a business disruption.

The benefits of optimizing indirect procurement

When you implement indirect procurement best practices, your company can experience these benefits throughout the procurement process: 

• Cost savings: Opportunities to consolidate orders or suppliers can save you money and boost your bottom line

• Improved efficiency: Operational efficiency directly translates to cost savings by reducing errors, bottlenecks, and delays

• Boosted compliance: Centralized procurement gives everyone insight into approved vendors and regulations to ensure buying policy compliance across the organization

• Enhanced supplier performance: Efficient indirect procurement can lead to stronger vendor management and auditing, which allows teams to always work with the highest-performing suppliers

• Strengthened risk mitigation: Complete visibility into your indirect procurement allows you to create accurate risk management strategies

• Organized supply chain: A well-structured supply chain promotes efficiency in both your operations and finances

• Improved vendor relations: Good relationships with vendors can open doors for more favorable contracts in the future

   

A wide range of tools is available to help you optimize your indirect procurement—but you can make the most of your efforts by opting for a full-scale procure-to-pay solution. 

Optimize your indirect procurement to increase efficiency

Indirect spend is too significant and too fragmented to manage reactively. Organizations that build systematic processes for visibility, consolidation, policy enforcement, and supplier management consistently outperform those that don't.

Amazon Business helps bring indirect spend under control, with a range of compliance tools to enforce purchasing policy, Amazon Business Analytics and Spend Visibility to track spend and analyze spend, and 300+ e-procurement integrations to connect the tools your teams already use.