Direct Materials Built My Career.
Indirect Spend May Ultimately Define It.

Brian Anderson

Managing Director, Value Delivery

 

For more than 30 years, procurement has been my professional home. For 18 of those years, I have also stood in front of a classroom, teaching graduate and undergraduate students how to think about cost, risk, and value in global supply chains. Over that time, I developed a bias that is still common across procurement organizations. I believed direct materials were the main event, and indirect spend was, at best, background noise.

Direct materials go into the product. They touch the customer. They show up clearly in the P&L. As an executive, I sat in countless leadership meetings where the message was always the same: we need lower material costs, we need margin improvement, we need to stay competitive. And direct was almost always the answer.

Steel, plastics, electrical components — that was my world. We sourced aggressively and fought for fractions of a penny in the bill of materials. That work mattered. It defined my career and delivered real value for the organizations I served.

Indirect spend was treated very differently. Marketing, IT, facilities, corporate services – sure they were important – but did they require strategy? We exercised basic governance, ran RFPs when contracts expired, and made sure nothing went off the rails, but we did not give those categories anything close to the attention we gave direct materials.  And at the time, that felt reasonable.

Looking back, it was a tremendous oversight.

What I eventually came to realize, somewhat uncomfortably, is that my focus on direct materials caused me to overlook a massive reservoir of untapped value. Not because indirect spend didn’t matter, but because it is harder. It is fragmented, highly specialized, and difficult to benchmark. It does not fit neatly into the traditional procurement playbook.

We routinely ask generalist procurement teams to source highly specialized services, from marketing agencies to complex facilities contracts, and then expect them to beat the market. I expected that of my teams. And I will be the first to admit — we did not.

They could not. And neither could I.

The real epiphany came when I saw what happens when indirect spend is treated with the same seriousness as direct, but managed through a fundamentally different operating model. The difference was not effort or intent. It was focus, specialization, market insights, and access to valuable market data.

Indirect categories are notoriously difficult to benchmark. Pricing is opaque. Demand is decentralized. Even the strongest internal teams simply do not see enough of the market to consistently outperform it. When organizations partner with a firm that focuses exclusively on these categories, something changes. You are no longer buying in isolation. You gain access to cross-client pricing data, category-specific expertise, and real market intelligence that no single organization can realistically build on its own.

This is not outsourcing for the sake of labor arbitrage. It is outsourcing for what I now think of as economies of intellect and scale.

As someone who has spent nearly two decades teaching supply chain in academic settings, this required me to challenge something I had taught for years. I used to believe that core competency meant keeping capabilities in-house. Experience has a way of refining theory. What I have learned is that true competency lies in knowing where specialization creates advantage.

In the case of indirect spend, value is not unlocked by trying to do everything internally. It is unlocked by connecting into a broader ecosystem that brings data, expertise, and execution together in ways a standalone organization simply cannot replicate. When organizations make that shift, they replace assumptions with actual industry benchmarks. They gain speed, discipline, and visibility in categories that have historically escaped control, not because they were unimportant, but because they were misunderstood.

Indirect spend did not just change how I think about procurement; it changed how I think about value. And if there is one thing I now tell both executives and students alike, it is this: the next frontier of procurement impact is not where we have always looked. It is where we stopped looking too soon.

On average, indirect expenditures represent about 20% of a company’s revenue. When managed at its best, savings on this spend can be anywhere between 8%–15%. Ask yourself…is this number not important enough for your business to give it proper focus?

About the Author

Brian Anderson

Managing Director, Value Delivery

Brian Anderson brings deep expertise in global supply chain operations, procurement, and Lean Six Sigma. He has held executive roles as Chief Procurement Officer at Davis-Standard and Vice President of Global Procurement at Duracell, where he led large-scale transformations and major integrations. Over his career, he has delivered over $700M in savings by connecting supply chain performance directly to business outcomes. Brian is especially focused on risk mitigation, integration, and developing the next generation of supply chain leaders as an Adjunct Professor at Elmhurst College.