From the course: Implementing Supply Chain Management

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From the course: Implementing Supply Chain Management

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- Before you'll have a product or service to sell to your customers, you generally need to buy things from your suppliers. We sometimes call that procurement, or purchasing, but in the score model, it's part of the source process. Let's look at how source fits into the rest of your supply chain. The things you buy can be categorized as direct purchases and indirect purchases. It's important to understand the difference, because many companies divide these purchasing responsibilities between separate teams, and they often use different processes. Anything you buy that becomes a part of the products you make is a direct purchase. The other things you buy that don't go into your products, those are indirect purchases. So if you run an automotive factory, the metal you buy to build cars is a direct spend, and the janitorial services to keep the building clean are an indirect spend. Whether we're talking about direct or…

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