The Differences Between Direct and Indirect Procurement and Sourcing

Over on Strategic Sourcing | Europe, Jean-Philippe Massin picks up on a European Leaders article that discusses the different leadership approaches that direct and indirect Spend Management approaches require. The cited article, penned by Nokia's VP of Indirect Procurement, Alf Noto, is a great short read.

I must say that a chuckled when reading the difference between "measuring savings" for direct versus indirect. Noto argues that measuring savings for direct materials is "easy". I would agree with this in most cases. However, the line between savings and cost avoidance can be challenging in volatile commodity markets where separating out raw material from value-added components is not always as simple as it sounds (in my view, anyone who tries doing this in metals processing areas such as heat treating and calls it easy is a masochist). But the part that really got me smiling was his comment that "measuring indirect = true lies" because the "saving[s] made by procurement is open to questions: how much will we buy in the future? What level of compliance should we assume?, [etc.]". In any event, do check out the piece. Noto's commentary is a quick 2-3 minute read that every procurement executive should look at.

Jason Busch

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