October 16, 2025

Indirect procurement: Definition, process, and examples

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In most companies, purchasing isn’t just about raw materials—it’s also the everyday buys that keep the lights on and teams moving. These operational purchases include office supplies, software and SaaS, facilities services, training, and professional services.

Those buys fall under indirect procurement: spending that supports operations but doesn’t become part of the product you sell. Indirect procurement is different from direct procurement, which covers inputs that do end up in the product. Getting indirect procurement right reduces waste, speeds up internal requests, and gives finance sharper visibility across departments.

What is indirect procurement?

Indirect procurement is the purchasing of goods and services that support operations but don’t become part of what you sell. It includes the everyday items and services that keep a business running efficiently.

Common categories of indirect procurement include:

  • Office supplies and furniture
  • Information technology (IT) and software licenses
  • Marketing and advertising services
  • Professional and consulting services
  • Human resources and recruiting tools
  • Travel and entertainment
  • Training and development
  • Facilities maintenance and utilities

Indirect procurement differs from direct procurement, which covers inputs that go into your final product. Because indirect spend impacts operating expenses rather than cost of goods sold, the stakeholders, approval paths, and controls are often different from those in production-focused purchasing.

Examples of indirect procurement

Indirect procurement covers your business operating expenses and services that provide behind-the-scenes support. It includes any goods and services not directly used in making a product. Some examples are:

Facilities management:

These are the services and goods used to build and support your physical workspace. Examples include: cleaning services, waste management, and office furniture. A dedicated facilities team usually manages these expenses.

Information technology (IT):

IT procurement includes the technology tools your team uses to support operations. This includes computers, phones, software subscriptions, and business technology consulting services. IT services or technology teams typically manage these expenses.

Marketing and advertising:

Any efforts to promote or build your brand or attract new customers are supported by marketing and advertising. These costs include promotional products, website design, paid marketing, branded merchandise, and external agencies. A dedicated marketing or advertising team usually manages these.

Professional services:

When you need specialized external services to support your overall business strategy and compliance, these expenses can include legal counsel, consulting fees, and accounting. Depending on the category, the executive, legal, or finance team typically manages this procurement.

HR services

Human resources services include any costs associated with recruiting and managing the employee lifecycle. These could include recruitment agencies, headhunters, benefits administration, and performance management. A dedicated HR team would manage these expenses.

Travel and entertainment:

If your team needs to travel for sales calls, attend conferences, or pay for client dinners, those expenses fall under travel and entertainment. Examples include airfare, rental cars, hotels, and meals. These expenses are managed by finance or by individual managers.

Office supplies and miscellaneous:

Office supplies include the everyday materials your team uses while in the office. This includes printing paper, pens, post-its, coffee, and snacks. An office manager or administrator typically manages these expenses.

Training and development

Any programs to help employees develop new skills necessary for their work or careers are known as training and development. Examples include leadership seminars, coaching services, and e-learning platforms. HR teams often manage these programs.

Utilities

Your utilities are the essential services to keep your office space or facilities operational. They include water, electricity, internet, heating, and air conditioning. Your facilities team likely manages these.

Maintenance and repairs

From time to time, your facilities will require regular maintenance or one-time repairs. Examples include HVAC repairs, plumbing services, or office painting. Your facilities or operations team typically manages these expenses.

Direct vs. indirect procurement: Key differences

Indirect procurement focuses on purchases that support operations, while direct procurement involves acquiring the materials and goods that make up your final product. Both are essential, but they serve different purposes and impact your business in different ways.

When you think about direct versus indirect procurement, both contribute to company performance in complementary ways: direct procurement sustains production, while indirect procurement supports the teams and infrastructure that make production possible.

Comparing direct and indirect procurement

At first glance, indirect and direct procurement can seem very similar. Review this quick comparison table to understand their key differences:

CriteriaIndirect procurementDirect procurement
PurposeBuying goods and services not used in the final productBuying raw materials and components used in the final product
ExamplesOffice supplies, maintenance services, software licensesMetals, hardware, microchips, food ingredients, machinery
Business impactInfluences operational efficiency and cost controlDirectly affects product quality and availability
Typical categoriesFacilities, IT, office supplies, marketingRaw materials, packaging, manufacturing tools, ingredients
Supplier tiesOften transactional and short-termOften long-term and strategic
FrequencyIrregular; varies by departmental needsRegular; aligned to production schedules

Why the distinction matters

Understanding the difference between direct and indirect procurement helps allocate resources more effectively, improve visibility, and manage risk.

These are three main ways they diverge across your business:

  • Budgeting and planning: Direct spend ties to cost of goods sold, while indirect spend is distributed across departments. Treating them the same can blur visibility and cause inefficiencies.
  • Risk management: Direct procurement risks include supply chain disruptions and quality issues. Indirect risks include non-compliance and operational delays.
  • Stakeholder involvement: Direct procurement stakeholders align with production and supply chain. Indirect procurement involves HR, finance, facilities, and IT.

The indirect procurement process

A standardized indirect procurement process helps you control costs, improve visibility, and stay compliant with procurement policies. Here’s how a typical workflow unfolds from start to finish.

1. Identifying needs

The process begins when stakeholders identify the need for a product or service that supports business operations. Departments submit requests that specify what they need and why.

Early involvement from procurement enables better demand planning, alignment with preferred vendors, and stronger pricing leverage.

2. Supplier selection and management

Once a need is defined, procurement reviews preferred suppliers, existing contracts, or issues an RFP. Evaluation criteria often include:

  • Price
  • Quality of service
  • Risk level
  • Compliance
  • Level of support
  • Payment terms

Because indirect procurement often spans many categories, standardizing supplier evaluations ensures consistent quality and better costs. Building long-term vendor relationships also improves service and reduces risk.

3. Purchase order and delivery

After selecting and approving a vendor, the team creates a purchase requisition to generate a purchase order. A standardized approval workflow helps the right people review each purchase based on spend, category, and department.

Documented POs maintain accountability, ensure goods and services match the order, and simplify future audits. Once items or services are received, perform basic quality checks before closing the order.

4. Invoice processing and payment

After receipt, the vendor issues an invoice for payment. Before processing payment, complete a 3-way match to confirm that the purchase order, receiving order, and invoice align on price, quantity, and quality.

Invoices typically include payment terms agreed upon during contracting—common examples include payment due upon receipt, Net 30, or Net 60.

Common challenges in indirect procurement

Managing indirect procurement brings its own set of challenges. From visibility gaps to supplier fragmentation and compliance issues, here are six of the most common hurdles teams face.

1. Limited visibility and control

Without real-time spend data, it’s hard to see how each department uses its budget or where waste occurs. This often leads to maverick spending and shadow IT—purchases made outside approved channels. Lack of visibility makes forecasting difficult and can cause budget overruns or misallocated resources.

2. Fragmented supplier base

Working with too many small vendors limits volume discounts and adds administrative work. Consolidating purchases with preferred suppliers can improve pricing, service consistency, and reliability. Regularly review contracts and supplier lists to identify overlap and negotiate better terms.

3. Manual processes and inefficiencies

Email- or spreadsheet-based approvals slow down purchasing and increase the risk of data entry errors. Procurement software automates the procure-to-pay process, creating faster approvals and fewer mistakes.

4. Decentralized purchasing

When departments manage their own purchases, it becomes difficult to track spending and enforce policies. Conflicting goals, miscommunication, and duplicate work can all result. Establishing a centralized procurement policy and cross-functional governance ensures alignment on budget and priorities.

5. Lack of proper risk management strategies

Risks in indirect procurement include supplier failures, compliance gaps, and operational disruptions. A structured risk-management plan should identify key suppliers, evaluate contingency options, and maintain diversity in the vendor base to avoid dependency on a single source.

Procurement software can help monitor supplier performance and automate alerts for contract or compliance risks.

6. Compliance issues

Non-compliance with internal or regulatory standards can lead to penalties and reputational damage. Clear procurement policies and automated routing for exceptions help maintain audit-ready processes and reduce exposure.

Best practices for managing indirect procurement

The best indirect procurement strategies go beyond cost control. They emphasize compliance, transparency, and long-term value. These best practices can help strengthen your procurement management program.

Centralize and standardize processes

Create a single set of procedures for all purchasing activity. Standardization reduces confusion, improves compliance, and increases negotiating power. Define clear roles and responsibilities so every department understands its part in the procurement process.

Leverage technology and automation

Use automation to reduce manual work, speed up approvals, and improve accuracy. Procurement software can manage order processing, track spend in real time, and provide analytics for better decision-making.

Build strategic supplier relationships

Fewer, stronger partnerships often outperform a wide vendor network. Consolidate where overlap exists, negotiate better volume discounts, and work toward mutual value with key suppliers. Regular reviews help ensure contracts stay competitive and relationships remain productive.

Implement spend analytics

Data visibility turns procurement from a cost center into a strategic function. Track savings, order accuracy, and supplier performance through dashboards that surface actionable insights. Schedule regular analytics reviews to align procurement performance with broader business goals..

The role of procurement software in indirect procurement

Modern procurement software centralizes and standardizes the indirect procurement process, addressing common challenges like limited visibility, fragmented suppliers, and manual workflows. The right platform makes it easier to track spend, improve compliance, and reduce costs.

Look for platforms that include:

  • Configurable dashboards
  • Customizable approval workflows
  • Supplier portals
  • Contract management tools
  • Automated purchase orders, invoices, and 3-way matching
  • Real-time analytics and reporting
  • Integrations with accounting and ERP systems

Supplier catalog management

Once you’ve created a preferred vendor list, a digital catalog helps employees choose approved suppliers for faster, compliant purchases. This reduces rogue spending and improves visibility across departments.

Approval workflow automation

Automated routing eliminates bottlenecks and keeps a complete digital audit trail. You can set thresholds so that, for example, purchases under $1,000 automatically route to department heads rather than executive review.

Contract lifecycle management

Automation ensures consistency in contract creation, storage, and renewal alerts. It helps avoid missed expirations or unwanted auto-renewals by keeping key dates visible in one system.

Spend analytics and reporting

Customizable dashboards show spending by vendor, department, or category. With this data, you can spot noncompliance, benchmark supplier performance, and identify consolidation or savings opportunities.

Integrations with existing tools

Modern platforms connect with ERP, accounting, or expense management systems for seamless data flow. Purchase orders automatically sync with budgets, reducing manual data entry and improving real-time tracking.

ROI and benefits

Procurement software delivers measurable efficiency and cost savings. McKinsey found that companies using procurement software for payments achieve 15–25% savings per transaction and faster processing times. Automation shortens purchase order cycles, minimizes errors, and provides better audit trails. It also builds compliance guardrails that reduce risk and improve vendor management.

Streamline procurement processes with Ramp

Effective indirect procurement management helps you remain strategic, control costs, and drive efficiencies across operations. Unlike direct procurement, which ties to your core product and follows a structured process, indirect procurement is broader, more fragmented, and often managed by multiple departments. Now is a good time to re-evaluate your indirect procurement practices—and Ramp can help.

Ramp Procurement includes features designed to simplify and standardize your workflows:

  • Advanced AP automation: Benefit from unlimited invoice processing using OCR to simplify accounts payable
  • Procurement categories: Segment spend into customizable categories for clearer budget visibility
  • Diverse payment methods: Pay by check, ACH, same-day ACH, card, or international transfer in USD or local currencies
  • Intelligent vendor management: Track vendors, extract contract details, and access price intelligence for better decisions
  • Customizable request forms: Tailor intake to capture required details up front
  • Efficient PO management: Streamline purchase orders with Ramp’s PO management tools

See how much time and money Ramp Procurement can help your business save.

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Holly StanleyContributor Finance Writer
Holly Stanley is a B2B writer for ecommerce, finance, and marketing brands. Prior to Ramp, she wrote long-form articles for the small business fintech Tide and worked with Intuit QuickBooks on their editorial content. You can find her articles on Descript, Hootsuite, Shopify, Vimeo, and more.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.

FAQs

Indirect sourcing is the process of purchasing goods and services that aren’t used to produce your company’s core products. Examples include office supplies, maintenance services, and software subscriptions that keep operations running smoothly.

Direct purchasers buy raw materials and components used in manufacturing the company’s main products. Indirect purchasers buy goods and services that support operations, such as office supplies, facilities management, or professional services.

An indirect procurement cost is an expense that supports operations but doesn’t go into your final product. Office supplies, software, and facility maintenance are common examples.

Procurement refers to the full process of identifying needs, selecting suppliers, negotiating terms, and managing contracts. Purchasing is one step within procurement—it’s the act of buying products or services once terms are agreed.

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