When organizations think about procurement cost management, the spotlight often lands on direct spend, the raw materials, products, and services tied directly to revenue, but sitting in the background is a category that can quietly erode margins or unlock competitive advantage: indirect spend.

What Is Indirect Spend?

Indirect spend includes the goods and services that keep a business running but are not part of the core product or service delivered to customers. Categories often include:

• Office supplies and furniture

• IT and telecommunications

• Marketing and professional services

• Maintenance, repair, and operations (MRO)

• Travel, logistics, and facilities

Individually, these expenses may look minor, but collectively, they often account for between 20% and 40% of an organization’s spend, according to McKinsey & Company. When left unmanaged, indirect categories become a patchwork of inefficiencies, fragmented suppliers, and hidden costs.

Why Indirect Spend Matters

1. The Hidden Cost Multiplier

Small, frequent, decentralized purchases add up. Without oversight, organizations pay higher prices, miss discounts, and duplicate orders across departments.

2. Compliance and Risk Gaps

Unmonitored suppliers or contracts introduce compliance and security risks. Shadow IT subscriptions, inconsistent supplier vetting, or uncontrolled services can create vulnerabilities that extend far beyond cost.

3. Missed Opportunities for Value

Because indirect spend is often overlooked, organizations miss chances to optimize MRO suppliers, standardize products, or align purchasing decisions with strategic goals like sustainability or digital transformation.

How to Optimize Indirect Spend

1. Centralize and Standardize

Pull fragmented purchases under preferred supplier agreements. Centralization increases leverage in buying power, and ensures consistency in pricing and quality.

2. Leverage Data and Analytics

Spend visibility is critical. Procurement analytics uncover duplicate suppliers, maverick spend, and underused services that drain resources.

3. Align Spend with Strategy

Indirect procurement should reflect broader business objectives, whether that’s sustainability, risk management, or operational resilience.

4. Consider Group Purchasing Organizations (GPOs)

One of the most effective, and often underutilized, levers is the GPO model. Leveraging a GPO pools the purchasing volume of many companies to negotiate stronger contracts, deeper discounts, and access to top-tier suppliers. For indirect categories, where fragmentation limits leverage, GPOs can deliver immediate value without requiring extensive internal resources.

CenterPoint’s Approach

CenterPoint Group specializes in helping organizations take control of indirect spend by combining category expertise with collective buying power. Our analytics-driven and group purchasing approach enables businesses to unlock value in areas that are too often ignored.

What we provide:

• Pre-negotiated supplier contracts: Immediate access to competitive pricing across categories like MRO, office supplies, packaging, and utilities.
• Category expertise: Deep knowledge of indirect spend markets ensures that contracts aren’t just cheaper, but also aligned with quality and service expectations.
• Tail spend management: Control the countless small purchases that traditionally escape procurement visibility.
• Supplier consolidation: Reduce administrative overhead and strengthen supplier relationships by standardizing categories.
• Data-driven insights: Benchmarking and spend reporting to uncover savings opportunities and enforce compliance.

The result is not only measurable cost savings but also reduced complexity, stronger compliance, and more strategic use of procurement resources.

Final Thoughts

Indirect spend may not be glamorous, but it is one of the largest untapped levers for business performance. Organizations that manage it proactively reduce waste, minimize risk, and free up capital for strategic initiatives.

The tools to make this shift already exist, centralized sourcing, procurement spend analytics, and group purchasing models that unlock the power of scale. By applying the same rigor to indirect categories as to direct procurement, businesses can turn what was once overlooked into a true source of competitive advantage.