Indirect Procurement

“Indirect” or “production-independent” procurement refers to the purchase of goods and services that do not directly contribute to a company’s end product. Examples  include office supplies, IT services, facility management, and marketing expenses. In contrast, “direct” procurement focuses on purchasing materials and components essential to production, such as raw materials or manufacturing parts.

These two areas differ significantly:

• Direct procurement directly impacts production processes and delivery timelines.
• Indirect procurement influences operational business performance and tends to be more fragmented, less predictable, and harder to standardize.

Despite its complexity, indirect spend holds significant hidden potential for cost optimization, making it an increasingly strategic lever for procurement leaders. However, organizations often face common barriers that limit their ability to realize these benefits:

• Decentralized organizations: Fragmented responsibilities, unclear decision-making, and limited transparency on demand and inventory levels.
• Lack of process and decision transparency: Suboptimal cross-company communication and inconsistent messaging toward suppliers.
• Inadequate tools and processes: Fragmented IT landscapes, limited digital procurement solutions, and weak ERP integration.
• Compliance and contract gaps: Insufficient employee training on contractual obligations, ineffective compliance monitoring, and a lack of standardized supplier contracts.
• Ad hoc demand management: Poor demand visibility, outdated monitoring, and inefficient approval processes.
• Poor data quality: Incomplete, inconsistent data (e.g., on suppliers, certifications, and services) exacerbates these issues.

Recognizing and addressing these structural and process-related barriers is critical to transforming indirect procurement into a driver of sustainable cost savings, efficiency, and strategic value.

For industrial companies, a well-designed indirect procurement approach helps reduce operating costs, simplify processes, and minimize compliance risks.
Digital technologies play a key role — through supplier consolidation and centralized procurement platforms that establish efficient, transparent structures.

Reduce operating costs. Increase profitability. Promote industrial sustainability.

Sustainability is also gaining importance in indirect procurement, for example, in selecting energy-efficient office equipment or climate-friendly logistics providers. Professionalizing indirect procurement can become a strategic driver to strengthen a company’s competitiveness.

EFESO Success Model: Professionalizing Indirect Procurement Across Three Dimensions

EFESO’s approach helps unlock the key success factors to measurably improve indirect procurement processes and deliver EBITDA impact. Our structured three-step framework tackles your most pressing challenges, delivering concrete solutions and results:

EFESO Expertise: Achieving MRO (Maintenance, Repair, and Operations) Excellence

MRO excellence can be addressed independently or as a complement to the above approaches. In the context of MRO, indirect procurement plays a pivotal role, encompassing the strategic management of all indirect materials and services not directly entering production.

With EFESO’s expertise, you can systematically target and reduce complexity drivers in MRO management. Key focus areas include:

• Fragmented data sources: Disconnected spare parts catalogs, supplier catalogs, and ordering systems complicate identification and price validation.
• Supplier diversity: Excessive supplier bases lead to inconsistent contract terms and increased transaction costs.
• Inefficient processes: Manual ordering, lack of ERP integration, and unclear departmental responsibilities slow supply chain workflows.

By leveraging digital technologies, data-driven decision-making, and systematic supplier evaluation, indirect procurement can significantly enhance MRO efficiency and deliver meaningful cost savings.

Proven results from EFESO client projects across various industries:

Supplier Consolidation

• 15–20% reduction in material costs through standardized framework agreements and volume-based discounts with strategic suppliers.
• 30–40% reduction in capital tied up in spare parts via demand-driven procurement and just-in-time deliveries.

Digitalization

• 50% fewer unplanned downtimes through predictive maintenance algorithms and IoT-based condition monitoring.
• 30% faster repairs via augmented reality (AR)-assisted troubleshooting and digital repair instructions.
• 25% lower inventory costs enabled by AI-based demand forecasting and automatic reordering.

Total Cost of Ownership (TCO)

• 20–30% reduction in total MRO costs by eliminating hidden process inefficiencies (e.g., damage management, manual ordering).
• 10–15% higher equipment availability through lifecycle cost optimization of critical machine components.

Cross-Functional Integration

• 90% fewer manual interventions in procurement processes through ERP-integrated purchase-to-pay workflows.
• 15% improvement in throughput by cross-department prioritization of maintenance activities.
• 100% compliance coverage through automated documentation and real-time supplier contract tracking.