Last Update: June 2025
Indirect procurement makes up the majority of business purchases, but it’s often overlooked. Even though direct procurement gets most of the attention, indirect spend quietly impacts your budget, operational efficiency, and bottom line every day.
If your team doesn’t have a clear strategy or the right tools in place, this area of spend can quickly spiral. It can lead to missed savings, non-compliant purchases, and poor visibility across departments.
This blog outlines proven best practices and strategies for managing indirect procurement in 2025, especially for teams aiming to reduce costs and improve compliance standards.
Indirect procurement is the process of purchasing goods and services that are critical to the day-to-day operations of a business, but not directly linked to the production of goods or delivery of services.
Indirect procurement enables a company to function effectively, is driven by employee demand, and affects a company’s profitability. Failing to recognize indirect procurement as a major cost-reduction driver is a missed opportunity to capture sustainable savings.
There are several categories of indirect procurement, some examples include: rent, office supplies, IT-related services, marketing-related services, capital expenditure, and travel management services, among others.
Direct procurement is the acquisition of raw materials to produce goods or services that a business is providing. For example, a fabric manufacturer can contract directly with a cotton or silk supplier to acquire the raw materials needed to produce apparel. Typically, direct procurement has an ongoing, direct impact on business profitability.
Unlike direct procurement, indirect procurement is often decentralized, initiated by non-procurement staff, and spread across departments. That makes it harder to track, harder to control, and more prone to inefficiencies if not properly managed.
The balance between direct and indirect procurement varies across industries. Manufacturing industries heavily rely on direct procurement, while service providers depend on indirect procurement. However, all organizations can get a competitive advantage and increase profits by implementing an effective indirect procurement strategy.
Learn more about the differences between direct vs indirect procurement.
Indirect spend typically accounts for up to 80% of total transactions and around 27% of business revenue. The volume may be high, but the purchases are often small and recurring, making them harder to monitor without the right controls.
Poor indirect procurement processes affect profitability in various ways:
When left unmanaged, these inefficiencies erode your margins. But with the right procurement strategy, businesses can cut costs by 15–20%, drive compliance, and make better purchasing decisions.
Most ERP systems weren’t designed to manage decentralized, high-volume indirect spend. This is the reason why many organizations find that they aren’t generating the indirect spend savings they desire. You need software that offers:
A dedicated procurement solution like Fraxion gives you visibility into who’s spending, how much, and with which vendors, so you can prevent waste before it happens.
Procurement tools enable automated process efficiency, which is key to the successful management of indirect procurement. You can automate tasks such as:
Automation frees up your team to focus on value-added activities and maximize productivity while reducing delays and errors in the purchasing process.
Purchases that fall outside the system, or outside procurement’s view, are hard to control. To improve transparency and control, you need to track indirect procurement with the same level of scrutiny used to monitor spending on direct supplies required for production. A modern platform can help by:
This makes it easier to eliminate duplicate spend, negotiate more favorable terms, and stay compliant.
A significant issue in indirect procurement is that most indirect spend comes from non-procurement staff. That’s why it’s critical to make the process simple and intuitive. All employees should learn to follow procurement procedures and implement the necessary framework to guide their purchasing decisions.
Give employees tools that:
This shifts procurement from gatekeeping to enablement. Consider implementing an indirect procurement solution that ensures accountability while making it easy to request, approve and make informed purchasing decisions on any device, from any location.
Indirect procurement is often fragmented, with contracts spread across different departments and locations. Make sure to centralize your contracts and review them for opportunistic terms, like the evergreen clauses that keep contracts in perpetual renewal year in and year out. Take enough time to:
Regular contract reviews help you find savings and eliminate hidden risk. So set aside some time to assess service contracts and ensure the materials being procured are still relevant to the organization.
Compliance issues in indirect procurement often stem from unclear policies, manual processes, or tools that are too complex to use. When purchases happen outside the system, it’s harder to enforce internal controls and track budget impact.
These four strategies will help you increase compliance across all departments within your organization:
Instead of relying on training or documentation, configure your procurement software to enforce rules automatically. This includes setting spend limits, flagging high-risk categories, and restricting vendors, all built into the request process.
Your software should validate every request in real time and prevent submissions that exceed budget thresholds. It should help managers authorize approvals fast (based on reliable data), and avoid overspending.
Automated approval chains ensure that every request goes through the right review process. With built-in routing and escalation rules, approvals don’t stall in inboxes and approvers are only looped in when necessary, keeping things compliant and efficient.
Every action in the procurement process should be logged and time-stamped: who requested it, who approved it, and what changes were made. This not only strengthens internal accountability but also makes audits and compliance reporting significantly easier.
If you lack seasoned procurement teams with years of negotiation experience, or a modern procurement solution to help you optimize the entire process, you can easily make procurement mistakes.
Below are some of the common mistakes to avoid:
Stay in control by being strategic in every phase of procurement, from planning to execution.
Managing indirect procurement shouldn’t feel like a moving target. With the right strategy and the right platform, you can reduce costs, drive policy compliance, and give your team full visibility into where money is going.
Fraxion helps mid-sized businesses simplify indirect spend with automated workflows, built-in policy enforcement, and analytics that make cost-saving opportunities easier to find.
Curious to learn how Fraxion supports smarter indirect procurement? Book a custom demo and see how your team can start spending more strategically.
Indirect procurement refers to the purchasing of goods and services that support day-to-day operations but are not directly tied to production, like office supplies, software, travel, and maintenance services. It’s important because it typically accounts for the majority of an organization’s transactions and significantly impacts operational costs, compliance, and overall profitability.
The most effective indirect procurement practices include investing in purpose-built procurement software, automating manual tasks, tracking all spend in one system, enforcing policy compliance, and reviewing contracts regularly. These steps help finance teams reduce maverick spending and improve cost control.
Mid-sized companies can reduce indirect procurement costs by consolidating vendors, enforcing budget checks before approvals, using data to negotiate better terms, and automating the purchasing process. Digital procurement tools like Fraxion make it easier to identify and act on savings opportunities.
To improve compliance, embed purchasing policies into your procurement software, automate approval workflows, enforce real-time budget checks, and maintain detailed audit trails. This ensures every transaction follows company guidelines and supports audit readiness.
Modern e-procurement software, such as Fraxion, helps streamline indirect procurement by centralizing requests, automating approvals, tracking spend by department or vendor, and flagging non-compliant activity. These tools improve efficiency, visibility, and decision-making across the organization.