Procurement Glossary & Terminologies

What is Direct Purchase ?

The term “direct purchase” refers to the procedure of buying products or services directly from the seller and avoiding all of the intermediaries. These purchases are made in bulk from various providers to get the best price, quality, and dependability. These purchases are routine and essential for fundamental business operations, such as a baker buying flour to make bread. Companies lose the ability to produce their goods and generate income if direct purchase stops working or has issues.

__Importance of Direct Purchase __

1. Cost Control

Cost analysis, an examination by the business of the expenses incurred by the supplier in providing a good or service, is a standard cost management technique in direct buy.

2. Inventory control

Inventory management knows your materials, where they are stored, and how much you will need. Materials must be kept on hand with direct purchasing to guarantee a smooth production process and avoid delays. Best practices for inventory management can be learned from direct purchases.

3. Utilizing technology

Companies are starting to understand how improving direct buy technologies can assist in simplifying workflows, reducing risks, upholding quality, and reducing costs. However, many procurement teams are still hindered by cumbersome systems connected to the company’s outdated ERP systems and may have a feature-rich user interface but lack an intuitive design. Cumbersome processes negatively impact compliance and productivity.

4. Organizational structure

Centralised supply chain and procurement teams often manage direct expenses, with category managers concentrating on specific spending categories. Teams responsible for direct spending can learn a lot from their colleagues about the soft skills needed to manage the numerous requirements, internal stakeholders, and vendors that make indirect procurement so challenging.