3 Neglected Areas of Indirect Procurement Worth a Second Look

Indirect procurement covers a wide range of spend, but not every category receives the same attention.

Manufacturing procurement teams usually have established processes for MRO, freight, and capital equipment. Other categories often receive less scrutiny because ownership is fragmented, the spend is specialized, or the sourcing opportunity is not obvious.

What Indirect Procurement Categories Are Often Overlooked?

Energy, corporate services, and corrugated packaging deserve a closer look. Each can contain meaningful savings and risk-reduction opportunities, but each also requires buyers to understand cost drivers that differ significantly from those of traditional direct materials.

Energy may sit with facilities or operations. Corporate services are often controlled by functional departments. Corrugated packaging may be managed plant by plant or program by program.

In each case, procurement can add value by bringing structure, market knowledge, sourcing discipline, and stronger supplier management.

1. Energy: Treat It as a Sourced Category, Not Just a Utility Bill

Energy can be easy to overlook because procurement does not always control it. Facilities, operations, finance, or an outside consultant may have significant responsibility.

That does not mean purchasing has no role.

Energy costs are affected by market conditions, generation methods, regulation, contract structures, transmission and distribution charges, supplier margins, consumption patterns, and risk-management decisions.

Market conditions are often among the most important drivers. Supply and demand, seasonality, geopolitical events, and global fuel prices can all affect what a manufacturing plant pays.

Buyers should also look beyond the commodity rate.

A plant’s load profile can affect pricing, particularly where peak-demand charges apply. Energy-efficiency investments can also reduce total spend without requiring a lower negotiated rate.

A practical procurement approach to managing the energy category includes:

• Establishing reliable sources for energy market data, forecasts, and indices
• Working with operations and facilities on consumption-reduction projects
• Evaluating fixed versus variable pricing and contract duration
• Considering available tax incentives, renewable energy credits, and other programs
• Reviewing termination provisions and other risks before entering long-term agreements

Energy procurement should be viewed as both a sourcing problem and a consumption-management problem.

2. Corporate Services: Look Beyond the Department Budget

Corporate services may be the broadest overlooked area of indirect spend.

The category can include travel, contingent labor, legal support, financial consulting, marketing, IT support, payroll services, employee benefits, facilities services, and many other activities.

The challenge is ownership. Internal stakeholders often understand the service better than procurement does. This can lead buyers to assume the category should remain outside procurement’s scope.

A better approach is partnership.

Procurement brings market analysis, supplier assessment, sourcing, negotiation, contract management, cost management, and supplier performance tools. The stakeholder brings knowledge of the business requirement.

This partnership is particularly important when services are outsourced. Outsourcing can provide access to specialized expertise, greater purchasing leverage, better data management, and lower risk. However, it can also create new problems when the relationship is poorly managed.

Common risks include selecting the wrong supplier, writing a weak contract, losing control of the outsourced activity, overlooking hidden costs, and failing to plan an exit strategy.

For buyers, the most important starting point is often a well-defined scope of work.

Before negotiating:

• Identify exactly which services are required
• Determine appropriate performance metrics
• Benchmark market rates and cost drivers
• Align with stakeholders on their pain points and budget constraints

Without that upfront work, buyers can waste time requesting quotes from providers that cannot deliver the specific services their internal customers rely on.

3. Corrugated Packaging: Look Beyond Price per Box

Corrugated packaging may look simple, but its specifications and economics can be surprisingly complex.

Boxes vary by dimensions, number of walls, flute, strength test, die cutting, virgin versus recycled content, printing, liner finish, and assembly method. These variables can create opportunities to reduce cost by challenging the specification rather than simply negotiating the supplier’s margin.

Cost structure also matters.

Paper is typically the largest component of corrugated packaging cost, with labor and freight accounting for much of the remainder. This makes market indices especially important when negotiating pricing mechanisms.

Corrugated spend is also frequently managed plant by plant or program by program. Centralizing the category can create opportunities to consolidate volume, establish index-based pricing, and improve visibility.

But annual volume alone does not determine the best price. Order quantity can be more important.

Buyers can also negotiate supplier-provided services such as:

• Design and prototyping
• Performance testing
• Vendor-managed inventory
• Local warehousing
• Value analysis and value engineering support

Most importantly, buyers need to balance cost improvement with continuity of supply. A cheaper box provides little value if the plant cannot ship finished products because packaging is unavailable or fails to protect the contents.

Where Should Indirect Procurement Look Next?

Overlooked indirect categories often share one characteristic: procurement does not have obvious ownership.

That is exactly why they deserve attention.

Energy requires coordination with facilities and operations. Corporate services require close partnership with functional stakeholders. Corrugated packaging may require collaboration with engineering, operations, logistics, and individual plants.

The opportunity is not simply to put more spend through an RFQ. It is to understand the category, identify its real cost drivers, challenge long-standing requirements, and apply procurement discipline where it has been missing.

For manufacturing procurement teams looking for their next source of savings, some of the best opportunities may be hiding in categories everyone has been paying for but few have been actively managing.

Build Stronger Indirect Procurement Skills

Managing indirect categories requires buyers to define requirements, understand cost drivers, collaborate with stakeholders, and manage supplier performance.

APD’s live virtual certification program provides practical tools for applying these skills to real indirect purchasing categories.

Explore the Indirect Purchasing Certification Program.

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