What is Indirect Spend
Indirect spend refers to purchases of goods and services that are not directly incorporated into a product being manufactured and sold to end customers.
Indirect spend includes all of the supplies and services that are necessary to run any organization such as marketing related services (i.e. media buying and creative agency services), IT related supplies and services (i.e. hardware, software, telecom), HR related services (i.e. recruitment and headhunting, training, temporary labor), professional services (i.e. financial and audit services, management and IT consultancy), travel related services (i.e. travel agencies, airlines, hotels, rental cars), facilities management and office services (i.e. furniture, cleaning, catering, printers) or utilities (i.e. gas, electricity, water), logistics services (i.e. courier services, warehousing, freight services) etc.
The majority of indirect spend is common across all businesses but for some enterprises indirect spend expenditures can form a greater proportion of total expenditure than direct spend.
The challenge managing indirect spend lies in the multitude of indirect categories and the fact that purchasing of indirect goods and services is often spread across the organizations without any centralization or control.