Indirect materials
Indirect materials are goods and supplies that support business operations but don't become part of the products a company manufactures and sells. These include maintenance supplies, office materials, safety equipment, facility needs, and professional services. While individual indirect purchases are typically smaller than direct material orders, aggregate indirect spend often represents 15-30% of total procurement dollars.
Examples
Manufacturing facility: Indirect materials include lubricants for machinery, replacement parts for equipment maintenance, cleaning supplies, personal protective equipment, office supplies for administrative staff, and facility maintenance items like light bulbs and HVAC filters.
Technology company: Beyond direct components, a hardware manufacturer's indirect spend covers laboratory equipment, test fixtures, software licenses for design tools, janitorial services, employee uniforms, break room supplies, and shipping materials not included with products.
Hospital: Indirect materials encompass administrative supplies, housekeeping chemicals, non-medical equipment maintenance parts, grounds keeping supplies, cafeteria provisions, and IT infrastructure components.
Definition
Indirect procurement presents different challenges than direct materials sourcing. The wide variety of items, many requesters across the organization, and lower individual transaction values make it difficult to achieve the same level of control and strategic management applied to direct spend.
Historically, many organizations gave limited attention to indirect procurement, allowing departments to purchase independently or through informal processes. This created fragmented spend, missed volume leverage opportunities, and maverick buying outside preferred suppliers.
Modern approaches to indirect procurement emphasize spend visibility, catalog-based ordering through preferred suppliers, approval workflows, and purchasing cards for low-value transactions. E-procurement systems help capture indirect spend data and enforce contract compliance while reducing administrative burden.
Some organizations centralize indirect procurement for leverage and control, while others decentralize to improve responsiveness, often using center-led models that balance both objectives.
Frequently asked questions
What are indirect materials?
Indirect materials are goods and supplies that support business operations but do not become part of the products a company manufactures and sells. Examples include maintenance supplies, office materials, safety equipment, facility needs, and professional services. Individual purchases are typically small, but aggregate indirect spend often represents 15 to 30% of total procurement dollars.
What is the difference between direct and indirect materials?
Direct materials are incorporated into the products a company sells, while indirect materials support operations without entering the product. In a manufacturing facility, indirect materials include lubricants for machinery, equipment maintenance parts, cleaning supplies, personal protective equipment, and facility items like light bulbs and HVAC filters, none of which appear on a product's bill of materials.
Why are indirect materials hard to manage?
Indirect materials involve a wide variety of items, many requesters across the organization, and lower individual transaction values, which makes the same level of control applied to direct spend difficult. Historically many organizations let departments purchase independently or through informal processes, creating fragmented spend, missed volume opportunities, and maverick buying outside preferred suppliers.
How do companies get control of indirect materials spend?
Modern approaches to indirect materials emphasize spend visibility, catalog-based ordering through preferred suppliers, approval workflows, and purchasing cards for low-value transactions. E-procurement systems help capture indirect spend data and enforce contract compliance while reducing administrative burden. Some organizations centralize indirect procurement for volume and control, others decentralize for responsiveness, and center-led models balance both objectives.
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