What is Direct and Indirect Spend in Procurement?

Direct spend is any expenditure made by a business for the procurement of goods or services that are directly involved in the manufacture of the end product. For example, for a car company, spend on the steel that makes up the body of the car, the rubber for the tires, the electronic components in the car, or the plastic for the interiors and dials; all of these are accounted for in direct spend or direct procurement. Indirect spend is any spend by a business or organization for materials and services that are not attributed to the production of the company's end product, but are rather critical to the continued operation of the company. Thus, in the same car company; indirect spend would involve the procurement of everything from laptops for its employees, to office space, resources for marketing and advertising, and all other essential goods and services that are needed to keep a company running. Learn more about the differences between direct and indirect spend.

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