Friday, May 1, 2020

Direct and Indirect Procurement

Skilled operations professional Ashwani Muppasani most recently served as the vice president of operations and quality at TE Connectivity Automotive Division in North Carolina. Prior to this, Ashwani Muppasani worked for other companies such as OHorizons Global Network and General Motors, where he handled several responsibilities including oversight of direct and indirect procurement.

A complex business operation, procurement involves the sourcing and purchasing of goods and materials necessary for business operations. There are two main procurement processes to be aware of: direct and indirect procurement.

Direct procurement is necessary for any business that sells a tangible item to consumers or other businesses. The process involves acquiring the raw materials necessary for creating this item, such as wood or concrete. Most businesses purchase raw materials in large quantities from suppliers who offer varying levels of quality, reliability, and cost. Without direct procurement, companies that produce tangible items can no longer function because they cannot manufacture their product.

Meanwhile, indirect procurement involves the purchase of supplies and services necessary for the company’s daily operations. These include office supplies and pieces of equipment or furniture. Unlike items bought through direct procurement processes, the supplies and services purchased through indirect procurement are not necessary for product development or manufacturing. However, should a business not obtain these items, it cannot properly operate, regardless of whether it has the raw materials it needs to create a product or not.