Sourcing and Procurement
Glossary
Your trusted guide to exploring sourcing and procurement terms & definitions,
from the world’s leading procurement experts and companies
Indirect Materials
All purchased materials and services that do not become part of the company's value proposition. May be classified into MRO suppliers, investment goods, and services.
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Indirect Spend
The cost of resources or activities such as operation costs and overhead that cannot be directly traced to a final cost object since no direct or repeatable cause-and-effect relationship exists. An indirect cost uses an assignment or allocation to transfer cost. These are goods and services typically handled through the Sourcing organization and cover everything from pens and paper to snow removal services to training services to employee benefits. After an organization classifies the money they spend into direct or indirect spend, they then further classify into spend categories. Although there is no formal taxonomy for classifying spend, many organizations will use the UNSPSC to help classify spend. It is also sometimes referred to as Indirect Costs. See Spend Category below.
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Indirect supplies
Services, tools and equipment that do not form part of the finished product but are required to maintain the business and production process, e.g., repairs, stationery, consultancy
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Industry
All organizations that provide similar services or products in any location.
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Index Pricing & Price Indices
Pricing tied to a published index. Link may be in absolute terms (e.g. $.10 below index) or % terms (e.g. 10% below index). Frequency of updates to contracted price should occur based on need (e.g. every 6 months, quarterly, daily).
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Indirect Purchasing
Purchasing of all goods and services that are used to support an organization's infrastructure and back-office activities. Many organizations also include the purchase of capital investments as an indirect purchasing activity.
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Indirect cost/indirect spend
Costs that are not directly incurred in the manufacture of a product or delivery of a service, e.g., insurance
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Inducement
Something offered to persuade or influence an individual to conduct themselves or business in a certain way
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Industrialization
The phase in which focus is on gaining momentum with the automation initiative, delivering a large number of automations and establishing the COE.
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