Strategic purchasing of direct materials offers greater long-term returns, says AMR's Mitchell, but he agrees with Brittan that indirect materials provide an attractive quick fix. They've picked their battles wisely, choosing fragmented spending areas with suppliers that are more tech savvy. Indirect purchasing, Brittan explains, is diffuse. Advertising and brochures are run by Communications. The president buys books and flowers.
Nobody owns it.
Direct purchases are usually handled by one or two specific departments with precise roles. While the fragmented nature of direct purchasing is complex, large suppliers of indirect materials have been quick to help companies gain control of their spending through online catalogs and preferred- supplier agreements. Before the first site can procure items used to manufacture a product, every active item must be included on an item master list so the Oracle system can generate the order and bills of materials. For a company with as many divisions and products as Ingersoll-Rand, that will ultimately mean including thousands of items for each division. Direct material purchases will also cause the number of suppliers listed in the Oracle system to grow dramatically, says Janson.