Direct vs indirect purchasing
First of all when we talk about purchasing what is the definition of direct and indirect spend? It might be slightly different from one company to another and generally speaking direct spend covers materials needed for production (raw materials , packaging) and indirect spend all the services and goods needed for company functioning except production ( such as office rent and supply, car fleet, travel, consulting, marketing spend, etc). Depending on the company, some Industrial spend such as equipment, spare parts, maintenance, professional cleaning and energy can be classified as indirect or direct .
So when the companies are recruiting Purchasing managers would they require different profiles for Direct and Indirect Buyer? The answer is yes. Of cause there is a common set of skills for Buyers like overall knowledge of purchasing process, negotiation or analytical skills, however the following skills would be more required from Indirect Buyer:
– Capacity to Negotiate with internal clients (stakeholders). Indirect Buyer generally spend more time to negotiate inside than outside the company ( with suppliers ). Unlike direct Buyer he or she doesn’t own the Budget, which is allocated in different departments and therefore developing cross-functional relationship with main departments such as Marketing, HR , Sales, Finance is vital to understand their requirements and needs. And then translate those needs into purchasing opportunities, to identify cost -saving projects and select best supplier base.
– Project management skill is important. Contrary to direct spend, which is mostly based on daily routine processes linked with factories, the Indirect Buyer works project by project – by identifying the opportunity, then following the project steps and getting the result, like cost saving or new way of doing things. For example Car fleet Buyer might initiate a number of projects like moving from buying to leasing the company car fleet, implementing new petrol cards, outsource car insurance to a separate provider, finding cheaper parking spaces and many others.
– Indirect Buyer need to have Sales skills since it is not only important to identify the Project but moreover critical to convince the management about its attractiveness and alignment with company objectives. So he needs to ” sell” the project internally to get a “green light” for its execution and implementation. We are talking here about capacity to present the project in the most effective way, highlighting strong points and associated risks, capacity to convince internal clients with positive “I can do” attitude about project deadlines and outcomes. Influencing skill, as one of the component of Sales skills, relates to the ability of the Indirect Buyer to effectively influence people at different levels of organization from junior employees to CEO. This requires taking other’s perspective into account and getting people to change their mind about specifics topics. You need to be confident to suggest the change to the management and get them to accept your idea.
– Change management – after the new project is finalized it should be implemented. For example in case of new Travel Policy , the Travel Buyer should accompany all employees towards the change required in term of booking / travelling habits such as new requirements to local or international trips, their approvals , booking rules, budget restrictions, using appropriate means of transport, insurance, etc. So the Travel Buyer needs to provide very clear internal communication about the change, set up clear steps to follow, as well as define the means of controlling the policy execution. He or she should have a high capacity for conflict solving, which are inevitable during this transformation process.
So what would be the advice for you to choose your Purchasing career between Direct and Indirect purchasing?
You are the best fit for Direct Buying if you have high level of expertise in the particular field, product oriented, you feel passion for the world of operations ( supply chain, planning, industrial production)
You are the best fit for Indirect Buying if you have capacity for building strong networks and relationships, strong drive to convince and implement change while constantly challenging the status-quo.
Elena MARIE (Ivanushkina), Directora General en Purchasing Talents.