Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

7 Best Practices for Indirect Procurement in 2025 – Explained

Junior Procurement Management Course

As taught in the Junior Procurement Management Course / ★★★★★ 4.9 rating

What is indirect procurement?

  • Indirect procurement is the acquisition of goods and services essential for daily business operations but not directly used in production.
  • Examples of indirect procurement include hiring professionals like lawyers or marketing experts, managing facilities, organizing travel, and other non-product-related expenses.
  • Optimizing indirect procurement can lead to cost savings and improved overall efficiency.

What is Indirect Procurement?

Indirect procurement refers to goods or services that are not directly used in making products. To put it simply, it is the act of buying or procuring materials or supplies to keep the daily operations of your business alive.

Procurement managers, in charge of indirect procurement, work with suppliers and talk to others in the company to buy the necessary materials. They also keep an eye on spending.

The costs of indirect procurement-related materials or services have gone up. This made companies pay more attention to making indirect spending better. They want to make sure they use money wisely.

To improve indirect procurement in your company, you need to understand what suppliers need. To save money, your company should always check how it spends money and find better ways to work with suppliers.

The 7 Best Practices For Indirect Procurement

Indirect procurement is a critical part of modern business operations, focusing on the acquisition of goods and services that do not directly contribute to the production of the final product. Effectively managing this process can lead to significant cost savings and improved operational efficiency. Here are seven best practices for successfully managing indirect procurement:

indirect-procurement

1. Develop a Comprehensive Understanding of the Procurement Landscape

Begin with an in-depth analysis of current processes and spending. Identify all cost categories, assess internal needs, and pinpoint key risks. This understanding allows you to define a precise strategy and manage resources more effectively.

Real-life Example: AlphaMed Health Services
AlphaMed Health Services—a regional hospital network—conducted a full spend analysis across all indirect categories (IT support, facility maintenance, professional services, office supplies), mapped each expense to its internal stakeholder’s needs, and identified top‑risk areas (e.g., unplanned emergency maintenance costs and variable consulting fees); by classifying spend into strategic buckets, engaging department heads in needs workshops, and running a risk‑heat assessment, AlphaMed was able to craft a targeted procurement strategy focusing resources on high‑impact categories and mitigate potential budget overruns.

2. Strategic Planning

Establish clear objectives and develop a long-term strategy that aligns procurement decisions with overall business goals. This planning phase should include defining criteria for supplier selection, developing policies and standards, and setting up performance metrics for monitoring success.

Real-life Example: BrightTech Innovations
BrightTech Innovations—a global consumer‐electronics company—set a long‑term goal to reduce its indirect spend by 10 % while boosting service‐level compliance to 95 %; it defined supplier‑selection criteria (total cost of ownership, SLA performance, and sustainability credentials), codified these into a company‑wide procurement policy, and established quarterly KPIs—cost‑per‑ticket, contract‑compliance rate, and supplier‑scorecard ratings—to monitor progress and drive continuous improvement.

3. Leverage Advanced Technology

Implement digital tools and software solutions to automate processes, improve transparency, and reduce operational costs. Data analytics plays a crucial role in identifying trends and optimizing procurement activities, which supports faster and more informed decision-making.

Real-life Example: PrimeSource Manufacturing
PrimeSource Manufacturing—a U.S.‑based automotive parts supplier—deployed an AI‑driven indirect procurement platform with RPA bots to automate purchase‑order creation, integrated spend‑analytics dashboards for real‑time visibility, and a centralized supplier portal for seamless collaboration; within six months, manual invoice‑processing time fell by 60 %, decision‑making speed improved by 30 %, and overall indirect spend dropped by 7 %, enabling faster, data‑informed procurement and greater cost transparency.

4. Build Strong Supplier Relationships

Forming strategic partnerships with key suppliers can ensure competitive pricing, high-quality services, and ongoing innovation. Establish clear communication, set mutual expectations, and continuously work to build trust and collaboration.

Real-life Example: EcoServe Facilities
EcoServe Facilities—a multinational facilities‑management firm—launched quarterly business‑review meetings with its top three cleaning‑and‑maintenance providers, co‑creating joint KPIs for response times and service quality, hosting annual innovation workshops to explore process improvements, and implementing a performance‑based rewards program; this collaborative approach deepened trust, drove an 8 % reduction in service costs, and lifted on‑site satisfaction scores to 97 %.

5. Category Management

Segmenting procurement into distinct categories allows for a better understanding of each group’s specific needs. Category management facilitates more effective negotiations, a specialized approach, and alignment with overall business objectives.

Real-life Example: TechWave Solutions
TechWave Solutions—a global IT services firm—segmented its indirect procurement into four key categories (software licenses, hardware, telecommunications, and professional services), appointed dedicated category managers for each group, conducted tailored market analyses, and developed specialized sourcing strategies (e.g., bulk‐license negotiations for software and volume‐discount agreements for hardware); by aligning each category’s goals with overall business objectives, they achieved a 12 % reduction in hardware spend and a 15 % increase in contract compliance across all service categories.

6. Continuous Monitoring and Evaluation

The success of indirect procurement depends on the constant monitoring of performance. Establish key performance indicators (KPIs) and regularly analyze results to quickly respond to market changes and optimize processes accordingly.

Real-life Example: FinEdge Digital Bank
FinEdge Digital Bank—a pan‑European fintech—deployed a real‑time procurement dashboard tracking KPIs like invoice‑accuracy rate, purchase‑order cycle time, and realized savings; they set up weekly automated reports and alerts for any KPI variance over 5 %, held monthly review meetings with stakeholders, and used root‑cause analyses to refine sourcing strategies on the fly—ultimately cutting invoice processing time by 10 % and boosting savings capture by 6 % in the first quarter.

7. Internal Training and Collaboration

Engage all stakeholders—from managers to end users—in the procurement process. Organize training sessions and workshops to familiarize everyone with processes and new technologies, thereby fostering a culture of collaboration and continuous improvement that contributes to long-term procurement success.

Real-life Example: NovaRetail Chain
NovaRetail Chain—a large European retail group—launched a “Procurement Academy,” mandating quarterly workshops for buyers, category managers, and key end‑users to practice using the new e‑procurement system, facilitated cross‑functional project teams to tackle real sourcing challenges, and instituted an internal mentorship program where experienced procurement staff coach colleagues in other departments; this comprehensive training and collaboration initiative boosted tool adoption to 95 %, cut user errors by 70 %, and fostered a shared culture of continuous improvement across the organization.

Examples of Indirect Procurement

Examples of indirect procurement include getting help from professionals like lawyers, marketing experts, or IT advisors. It also covers things like taking care of buildings, organizing travel, and other costs that aren’t directly connected to making products.

Unlike buying actual things, like materials for products, it is about getting services or intangible resources. This needs extra thought to make sure it’s worth the money.

Here’s what happens: People look at what the company spends money on and talk to the people who sell those services. They try to get the best deal, like paying less for good legal advice or finding a good deal on travel.

Also, they need to maintain good relationships with the people who provide these services and talk to other employees in the company to find ways to save money. And it’s smart for companies to have a clear plan for how they spend money this way so that everyone will follow the rules strictly.

The Importance of Indirect Procurement

Indirect procurement is important because it helps a company run smoothly. It’s about buying things that aren’t directly used to make products, like office supplies, computers, or services. Even though it’s not the main spending, it still matters a lot.

When a company gets more efficient in how it buys these indirect materials or services, it can save money and work better. For example, if a company gets good deals on office supplies or hires experts at a good price, it can use its money wisely.

Thus, it might not be the biggest part of spending, but making it better can help a company do well by saving money and making things run nicely.

Metrics You Can ApplyFor Your Indirect Procurement Strategy

Because indirect procurement is crucial for a company’s stability, it requires a well-thought-out plan. This plan ensures that the things bought are good quality, reasonably priced, and meet the company’s set standards.

The job of creating, carrying out, and sticking to this indirect procurement plan falls on the procurement manager. A strong plan typically includes the following metrics or standards:

indirect-procurement (1)

1. Automation

Again, e-procurement is key to achieving good procurement results. Process automation through e-procurement solutions is becoming more and more popular nowadays because it simplifies the entire procurement process.

From gathering data to comparing vendors, a procurement strategy has never been easier. Of course, the said strategy should still have its human touch and it’s the job of the procurement manager to do that part.

2. Innovation

Suppliers should also be involved in the procurement strategy as they are well-versed with innovation. Suppliers must work together with the internal procurement team to come up with innovations that will help the strategy as a whole.

3. Value Creation

For the procurement manager, creating value for the stakeholders is still the top priority. This means finding ways to get the best deals and use the company’s money wisely when purchasing things that aren’t directly used in making products.

4. Cost Control

For a great strategy to work, there should be cost control. It will remain as main goal of the procurement team. This is probably the only area where both indirect and direct procurement meet in the middle.

The methods used for achieving this are supplier negotiations, pooling of purchases, specification of adjustments, and even the change of suppliers.

5. Responsible procurement

Finally, companies that deal with procurement must make it mandatory to practice Corporate Social Responsibility or CSR.

What this means is that the procurement team makes it a point to check their supplies and whether services or products are acquired through ethical and responsible means. While it is not yet popular among huge companies, the idea is catching on rather quickly.

Challengesof Indirect Procurement

Here are some of the possible challenges that you can face in indirect procurement:

1. Handling a Lot

In the world of procurement, there’s usually a lot going on at the same time. This includes working on big deals with many suppliers while keeping an eye on different things we spend money on. Handling all of this can be quite complicated and needs good planning to use time and money well.

2. Not Always Clear

Sometimes, the people who need to say “yes” to purchases don’t know about them right from the start, or they’re not kept in the loop as things progress. This can slow things down. Thus, it can also lead to missing important information.

3. Control

Imagine you’re the captain of a ship, but you can’t see the whole sea. When different people ask for things and different people approve them, it’s hard to see where the money is going. It’s like not being able to see all the spots on a map. Having smoother processes is like having a clearer map – it helps you see what’s happening and keeps things in order.

The Differences Between Direct Procurement and Indirect Procurement

The following are the main differences between direct and indirect procurement:

Direct Procurement
Direct procurement is necessary for the business.
Direct procurement has the highest priority and percentage of a company's spending.
Usually procured in large quantities.
Impacts the products of businesses.
Usually become a part of the finished products.
Indirect Procurement
Indirect procurement is not that crucial to businesses.
Indirect procurement is often overlooked as many procurement professionals put a low priority on it.
Typically procured in small quantities
Helps run the daily operations of a business.
Indirect procurement of materials or services has nothing to do with the finished products.

Conclusion

In conclusion, indirect procurement plays a vital role in the overall functioning of a company. While it may not always be the main focus, its significance lies in efficiently acquiring services, resources, and support that enable the smooth operation of business activities.

It ensures that essential needs are met, such as legal assistance, office supplies, and facility management, contributing to the company’s effectiveness and productivity.

By carefully managing indirect procurement, companies can optimize spending, maintain quality standards, and enhance operational efficiency.

Frequentlyasked questions

What is indirect procurement?

Indirect procurement is the process of buying/procuring supplies that are instrumental to the daily operations of the company.

How to do indirect procurement?

Like most procurement processes, indirect procurement requires data gathering and the sourcing of potential good suppliers.

How is indirect procurement different from normal procurement?

The latter is all about buying supplies for the growth of the company. The former, however, is all about buying supplies for the daily operations of the company.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics