The Procurement Glossary » Direct Spend

Direct Spend

Spend & Analytics

Definition

Spend on goods and services that go directly into the products a company makes or sells.

Explanation

Direct spend (raw materials, components) is tied to production volume and directly affects cost of goods sold. It is typically managed closely with engineering and planning, distinct from the indirect spend that keeps the business running.

Example

Steel and resin are direct spend for the manufacturer, planned against the production schedule.

Related terms

• Indirect Spend — Spend on goods and services that support operations but don't go into the end product — such as office supplies, IT, travel and facilities.
• Specification — A precise description of what is required — the features, quality, quantity, standards and performance a supplier must meet.
• Cost of Goods Sold (COGS) — The direct costs of producing the goods a company sells, including direct materials and labour.
• Category Management — Managing related groups of spend as strategic business units, each with a tailored strategy and dedicated ownership.

Frequently Asked Questions

What is Direct Spend?

Spend on goods and services that go directly into the products a company makes or sells. Direct spend (raw materials, components) is tied to production volume and directly affects cost of goods sold. It is typically managed closely with engineering and planning, distinct from the indirect spend that keeps the business running.

Can you give an example of Direct Spend?

Steel and resin are direct spend for the manufacturer, planned against the production schedule.

Back to the procurement glossary | Procurement concepts | Contact us