"Every company obsesses over what goes into the product. Far fewer watch the money spent keeping the lights on — and that's exactly where the savings hide."
6 min read · June 2026
Good Morning, Good Evening, and Good Night — wherever you're reading this. This month we go somewhere most supply chain conversations skip right past. Everyone loves to talk about raw materials, suppliers, and shipping lanes. Almost nobody wants to talk about the laptops, the software subscriptions, the cleaning contracts, and the consulting invoices. But that quiet, scattered, "boring" spend is one of the biggest untapped levers in the entire business — and understanding it starts with one simple distinction.
Procurement — the function of buying everything a company needs — splits cleanly into two worlds: direct and indirect. Once you see the line between them, you can't unsee it.
Direct procurement is everything that physically goes into the product you sell. For a carmaker, that's steel, glass, tires, and the chips in the dashboard. For a coffee chain, it's beans, milk, and cups. Direct spend is tied to your bill of materials, it scales with how much you produce, and it lands in cost of goods sold (COGS). It's planned, forecasted against demand, and managed through a handful of strategic supplier relationships everyone in the company can name.
Indirect procurement is everything else you buy to run the business but never sell. The software your teams log into. The office furniture. Marketing agencies. Travel. Facilities and maintenance. Temporary staffing. IT hardware. Legal and consulting fees. None of it touches the product — but the company stops functioning without it. This spend lands in operating expenses (OpEx / SG&A), and it behaves nothing like direct spend.
The cleanest test: ask whether the purchase would appear in the product if you took it apart. The aluminum in the can? Direct. The electricity running the canning line, the safety gloves, the SAP license that tracks it all? Indirect.
Here's the part that surprises people new to the field: indirect spend is usually not small. Depending on the industry it can run anywhere from 15% to 40% of total revenue. For a services or technology company with no physical product, indirect is nearly all of the spend. And yet it's chronically under-managed — for three structural reasons.
First, it's fragmented. Direct spend concentrates in a few big contracts. Indirect spend scatters across thousands of small transactions and hundreds of vendors — the classic "long tail." A common pattern: the bottom 80% of suppliers account for only about 20% of the spend, but they generate the overwhelming majority of the invoices, the purchase orders, and the administrative headache. This is tail spend, and it's where control quietly breaks down.
Second, ownership is murky. Direct procurement has a clear owner — the supply chain team lives and breathes it. Indirect purchases get made by whoever happens to need something: marketing buys its own tools, engineering picks its own software, each office handles its own supplies. No single person sees the whole picture.
The maverick spend problem: When buying is decentralized and easy, people go around the approved process — expensing a tool on a credit card, renewing a contract nobody negotiated, hiring a vendor off a recommendation. This is maverick spend: purchasing that bypasses procurement entirely. It's invisible, it's un-negotiated, and it's almost always overpriced. You can't manage what you can't see — and most companies genuinely cannot see it.
Third, it's been culturally dismissed as unglamorous. Saving 5% on a steel contract gets you a promotion. Renegotiating the office-coffee vendor does not. So the talent and the attention flow toward direct — and the indirect side accumulates years of quiet waste.
If you want the most modern, most relatable example of indirect procurement gone wild, look at software subscriptions. The average mid-sized company today pays for well over a hundred SaaS tools — and a startling share of leadership teams cannot produce an accurate list of what they're actually subscribed to.
Three teams buy three different project trackers. A tool gets adopted for one project and auto-renews for three years after the project ends. Licenses are bought per-seat for people who left the company. Two departments pay full price for products that, bundled, would cost half as much. None of this is fraud — it's just what happens when small, easy purchases multiply with no one watching the total. It is indirect procurement's defining challenge, compressed into a single category.
"Direct procurement is a negotiation. Indirect procurement is an archaeology dig — first you have to find out what you're even buying."
— A sentiment every procurement analyst eventually learnsFor decades, the reason indirect spend stayed messy was simple economics: the savings on any single transaction were too small to justify a human analyst's time chasing them. The juice wasn't worth the squeeze. That math just changed.
AI-native procurement tools can now ingest every invoice, every contract, and every line of expense data and classify the entire spend base automatically — surfacing duplicate vendors, overlapping software, expiring contracts, and off-contract "maverick" purchases without anyone manually combing through spreadsheets. The long tail that was too expensive to manage by hand is exactly the kind of high-volume, pattern-heavy problem machines are good at. Ask a question — "show me every vendor we're paying for the same capability" — and get an answer in seconds instead of a three-week audit.
This is the throughline from last month's journal: the same agentic, conversational analytics rewriting business intelligence is landing hard in procurement. The companies that point it at their invisible half first will quietly free up margin their competitors don't even know they're losing.
A few things I'm tracking. Whether "tail spend automation" graduates from a buzzword into a standard line item in procurement budgets. Whether finance and procurement finally merge their view of OpEx — because indirect spend is the seam between the two and it's been falling through the gap for years. And whether the SaaS reckoning forces a real discipline around software buying, or whether companies just keep paying for tools they've forgotten they own.
The product gets all the attention. But for anyone serious about supply chain and operations, the invisible half is where the next decade of real, unglamorous, enormous savings is hiding in plain sight.
"The money you forget you're spending is the easiest money you'll ever save. Indirect procurement isn't boring — it's just been ignored long enough to become an opportunity."
— Daivik Suresh, June 2026-DAIVIK SURESH-
Supply Chain + Business Analytics Enthusiast · June 2026Not financial advice. All opinions are personal. Investing involves risk including potential loss of principal.