Indirect Purchasing
APD resources to learn about buying and managing indirect categories.
Blog Articles
3 Neglected Areas of Indirect Procurement Worth a Second Look
Posted onBy Mike WynnEnergy, corporate services, and corrugated packaging often receive less procurement attention than other categories. Learn where buyers can uncover savings, reduce risk, and improve supplier management.How Buyers Can Build Support for Sourcing Changes
Posted onBy Mike WynnA buyer completes a market test and identifies significant savings. The analysis is solid. The recommended supplier meets the documented requirements. Then the stakeholders refuse to change suppliers. This happens too frequently. The buyer starts by evaluating…5 KPIs Every Indirect Purchasing Team Should Track
Posted onBy Mike WynnIndirect purchasing teams in manufacturing companies don’t get much recognition. Direct material savings are usually easier to measure. A buyer negotiates a lower part price. The savings flow into product cost. Finance can see the…6 Prompts to Cut Through the Clutter of Indirect Purchasing
Posted onBy Mike WynnIndirect purchasing is messy by nature. A direct materials buyer may focus on a handful of categories tied to a production process. An indirect buyer often manages dozens of unrelated categories at the…3 Key Contract Elements to Protect Capital Projects
Posted onBy Mike WynnCapital projects carry high stakes. They consume large budgets. They affect capacity. They influence customer commitments. And once work starts, reversing a bad decision is expensive. Many capital project failures do not start in the field. They…5 Steps Indirect Buyers Use Unlock Savings Opportunities with Cost Tables
Posted onBy Mike WynnIndirect spend categories like temp labor, packaging, freight, and capital equipment are notorious for hiding savings in plain sight. Experienced indirect buyers have learned that cost tables transform the way organizations manage these categories. Here’s how you can leverage cost tables to drive real results. Why…Buyers Guide to a Bulletproof SOW for Indirect Materials or Services
Posted onBy Mike WynnIndirect market tests rarely go smoothly when the Statement of Work is unclear. When requirements are vague, suppliers make assumptions. Quotes come back inconsistent. Performance varies across sites. Internal customers complain that the…Strategic Sourcing for Indirect Spend
Posted onBy Mike WynnWhen most organizations think about sourcing strategy, they typically focus on direct materials, where strategic sourcing initiatives are well-established and commonly used to implement category strategies. Indirect categories like IT, facilities, logistics, marketing,…
On-Demand Webinars
3 Key Skills for Managing Indirect Categories – 10/10/24
Learn essential steps to collaborating with stakeholders to deliver increased value for indirect spend categories.
Online Training Programs
Indirect Purchasing Certification
Learn the unique practical skills for buying and managing indirect categories in this 2-month certification course with project.
Fast-Track Savings Workshop
A hands-on workshop combining training in APD’s straightforward Fast-Track Savings process with a real-world market test to quickly optimize your company’s commodity buy for direct materials or indirect spend.
Consulting Services
Fast-Track Savings
Quickly implement six-figure cost reductions on categories with untapped savings opportunities such as MRO, resins, freight, and packaging.
Commonly Asked Questions
| Involve stakeholders before evaluating suppliers, not after selecting one. Interview affected functions and plants to document current service levels, pain points, requirements, and implementation risks. Use that input to develop the Statement of Work and supplier evaluation criteria. Related Articles https://apurchasingd.com/how-buyers-can-build-support-for-sourcing-changes/ https://apurchasingd.com/3-crucial-stakeholder-questions/ https://apurchasingd.com/indirect-procurement-insights-leveraging-cost-tables-stakeholder-interviews/ |
Three Crucial Stakeholder Interview Questions |
|---|
What do you rely on from the current suppliers of [category] |
Do you have any pain points with the current suppliers of [category]? |
Any improvements you’d like to see from [category] suppliers? |
| Indirect teams should select a few measures that reflect company priorities, then agree with finance and stakeholders on definitions and reporting frequency. Good elements to track include cost control, supplier performance, process efficiency, compliance, and stakeholder satisfaction. Useful measures include savings, cost avoidance, spend under management, service levels, purchase order cycle time, contract compliance, and issue-resolution time. Related Articles https://apurchasingd.com/5-kpis-every-indirect-purchasing-team-should-track/ |
Area | Example KPIs |
|---|---|
Cost and savings | Cost savings ($), total spend under management (%), cash improvement ($) |
Supplier performance | Supplier on-time delivery (%), supplier consolidations (#) |
Process efficiency | PO cycle time (days), invoice processing (days) |
Compliance and risk management | Contract compliance (%), risk mitigation actions (#) |
Stakeholder satisfaction | Internal customer satisfaction score (%), issue resolution time (days) |
| Procurement can use AI to prepare stakeholder questions, analyze spend, develop category objectives, research suppliers, draft SOWs, and review contracts. Give the AI relevant category data, business requirements, constraints, and a clear output format. Buyers must validate supplier information, calculations, and recommendations while following company rules for confidential data. AI should support procurement judgment, not replace it. Related Articles https://apurchasingd.com/6-prompts-to-cut-through-the-clutter-of-indirect-purchasing/ https://apurchasingd.com/how-procurement-teams-use-ai-to-get-work-done/ |
Topic | Example Prompt |
|---|---|
Improving category objectives | I have an objective that needs improvement. Please analyze it using the SMART framework and ask me clarifying questions to fill in any missing elements Objective: [Deliver $400k/year savings on energy, with saving beginning to be realized by April 1, 2025]. |
Developing stakeholder interview questions | Develop a structured set of interview questions to understand stakeholder needs for suppliers in a specific category. Start by asking: – What the category is – What function or role the stakeholder holds in the organization Make sure the questions are open-ended, tailored to the stakeholder’s function, and designed to uncover both operational and strategic needs. |
Identifying potential suppliers | As a buyer for global manufacturing company, list 10 [category] suppliers that specialize in [your specific needs]. Provide links to their web sites. |
Researching a category | As a buyer of [category] for a manufacturer in [your industry], search the web to identify 5 articles published since [date] focused on trends in [category] industry. Summarize the relevant information and provide links to each article. |
| Start by classifying spend and documenting common and plant-specific requirements. Interview stakeholders at each location, identify capable suppliers, and conduct a market test using consistent specifications and evaluation criteria. Compare total cost, service, risk, and operational fit rather than price alone. For higher-risk categories, begin with selected plants, lanes, SKUs, or subcategories and expand after the supplier meets defined performance targets. Related Articles https://apurchasingd.com/strategic-sourcing-for-indirect-spend/ https://apurchasingd.com/the-4-phases-of-an-effective-strategic-sourcing-initiative/ https://apurchasingd.com/8-important-activities-before-launching-a-strategic-sourcing-market-test/ |
Strategic Sourcing Checklist for Indirect
- Build practical AI skills across the procurement team.
- __ Create a project charter
- __ Review supplier contracts
- __ Review the category & supply base
- __ Clean and segment the spend
- __ Interview stakeholders
- __ Develop an ideal supplier profile
- __ Conduct a supply market assessment
- __ Document category objectives
- Market Test Preparation Steps
- __ Develop a Statement of Work
- __ Develop an RFQ document
- __ Select a market basket of representative items and spend
- __ Develop a quote review form
- __ Identify potential suppliers
- __ Interview suppliers potential suppliers
| Develop three to five SMART objectives (Specific, Measurable, Achievable, Relevant, Time-bound) that connect company priorities with stakeholder needs. Include results objectives, such as reducing freight cost or eliminating critical MRO stockouts, and process objectives, such as completing a market test by a specific date. Balance savings with service, compliance, continuity, and risk. Define the baseline, target, deadline, owner, and measurement method for each objective. Related Articles https://apurchasingd.com/developing-effective-indirect-category-objectives/ |
5 Common Mistakes When Writing Indirect Category Objectives
- Measuring too much
- Measuring nothing
- Confusing process with results
- Focusing on measures that mean little
- Using measures that are not understood
| An effective Statement of Work (SOW) should define the scope, deliverables, exclusions, timeline, performance standards, responsibilities, payment terms, acceptance criteria, risks, and escalation process. Requirements should be measurable. For example, replace “provide timely maintenance” with specific response and completion times. Give all bidders the same SOW and incorporate the final version into the contract to improve quote comparability and supplier accountability. Related Articles https://apurchasingd.com/buyers-guide-to-a-bulletproof-sow-for-indirect-materials-or-services/ |
Area | Description |
|---|---|
Scope of Work | Thoroughly detailed, all tasks, services, and deliverables are clearly defined with no ambiguity. |
Timeline & Milestones | Comprehensive timeline with clear, realistic milestones for each project phase. |
Performance Standards | Clearly defined, measurable results and process performance criteria with specific quality standards and metrics. |
Roles & Responsibilities | Roles and responsibilities are clearly defined for all parties, with no overlap or confusion. |
Payment Terms & Conditions | Payment terms are clear, aligned with deliverables, and based on a structured, fair approach. |
Acceptance Criteria | Detailed, specific criteria for the final acceptance of deliverables, leaving no room for misinterpretation. |
Risk Management | Potential risks are thoroughly identified, and mitigation strategies are clearly outlined. |
| Cost tables organize supplier prices, specifications, commercial terms, and cost drivers in a consistent format. Buyers can use them to compare similar products or services, identify pricing outliers, validate new quotes, and prepare negotiations. For corrugated packaging, a cost table might compare material, dimensions, order quantity, and price per 1,000 square inches. Update the table with each new quote or invoice. Related Articles https://apurchasingd.com/5-steps-indirect-buyers-use-unlock-savings-opportunities-with-cost-tables/ https://apurchasingd.com/using-cost-tables-to-find-savings-in-indirect-spend/ |
Supplier | Material | Commercial Terms | Physical Part Attributes | Quote Data | Calculations | |
|---|---|---|---|---|---|---|
Part No. | Name | Type |
|
| Price |
|
| Capital-project contracts should define project milestones, payment triggers, acceptance criteria, retention, and remedies for delay. They should also address safety, insurance, indemnification, subcontractor controls, environmental obligations, lien waivers, and responsibility for damage. Tie payments to measurable deliverables and retain enough value to ensure punch-list completion. Related Articles https://apurchasingd.com/3-key-contract-elements-to-protect-capital-projects/ |
Capital Project Contract Review Checklist
- Scope of Work (SOW) – Define deliverables, work to be performed, and exclusions.
- Project Timeline and Milestones – Include project schedule, key milestones, and penalties/incentives.
- Cost Structure and Payment Terms – Outline total contract value, payment schedules, and cost controls.
- Change Management Process – Specify how change orders will be managed and approved.
- Performance Guarantees and Warranties – Define performance standards and warranty durations.
- Risk Allocation – Identify risks and allocate responsibility; include insurance requirements.
- Quality Control and Inspection – Outline procedures for inspections and managing non-compliance.
- Health, Safety, and Environmental Compliance – Define safety/environmental standards and incident reporting.
- Termination Clauses – Include conditions for contract termination and related penalties.
- Dispute Resolution Mechanism – Specify dispute resolution methods (e.g., mediation, arbitration).
- Intellectual Property and Confidentiality – Clarify IP ownership and confidentiality obligations.
- Liquidated Damages and Incentives – Define penalties for late delivery and incentives for early completion.
- Retention and Final Payment – Specify retention amounts and conditions for release.
- Indemnification and Liability – Outline indemnification responsibilities and liability limitations.
- Compliance with Laws and Regulations – Ensure compliance with laws, including labor and environmental.