Streamlining Indirect Spend for Faster Business Growth

This article is brought to you in association with Amazon Business.

Indirect spend remains one of the biggest opportunities for organisations to improve efficiency, strengthen cost control and drive greater procurement visibility. Discover how a more consolidated approach to purchasing can reduce complexity, improve compliance and unlock measurable business value. 

Indirect spend is, for many businesses, a sprawling and poorly governed cost base. It typically accounts for up to 80% of total transactions and around 27% of business revenue. Yet the purchasing behaviours that drive it are rarely subject to the same discipline applied elsewhere. 

The problem is structural. Maverick spending, disconnected systems and inconsistent buying practices make it difficult to track where money goes and even harder to rein it in. Because indirect procurement tends to be initiated by non-procurement staff across multiple departments, it operates without the centralised oversight that direct spend receives. The result is a patchwork of contracts, varying price points and duplicate purchases that accumulate quietly over time. 

When unmanaged, indirect spend can represent between 20% and 40% of total company expenses, with duplicate purchases, inconsistent supplier terms and missed volume discounts routinely going unnoticed. The long-term consequences extend beyond line-item cost: fragmented indirect categories erode cash flow, reduce reinvestment capacity and make it harder to build the operational agility that growth requires. Indirect spend is where fragmentation and leakage introduce the most complexity and, therefore, the greatest opportunity for improvement. 

Consolidating suppliers and purchasing channels

Rationalising the supplier base is one of the most direct interventions available to procurement teams. The top 20% of suppliers often generate 80% of purchasing value, while the remaining 80% generate only 20%, yet account for the majority of administrative workload. That imbalance has a tangible cost: every supplier on the books requires contract negotiation, quality checks, invoice processing and ongoing relationship management, regardless of the value they deliver.

McKinsey's 2024 procurement benchmarking analysis found that companies with top-quartile procurement maturity achieved EBITDA margins at least five percentage points higher than peers with less-developed capabilities. Much of that advantage is attributable not to complex strategy but to getting the fundamentals right: supplier segmentation, rationalisation and the consistent application of preferred-supplier agreements.

Consolidating purchasing channels compounds those gains. A consolidated view makes it easier to negotiate better terms, secure volume discounts and maintain consistently high-quality products and services. Where departments have historically sourced independently, centralising even a portion of indirect categories through agreed channels creates immediate leverage. The mechanics are straightforward; the organisational will to enforce them is where most programmes stall.

Impact on productivity and cost control

The administrative burden of fragmented indirect spend is frequently underestimated. In many cases, the administrative work required to manage lower-value suppliers exceeds the value of the goods purchased from them. Time spent processing low-value purchase orders, chasing approvals and reconciling invoices across disparate systems is time not spent on work that moves the business forward. 

Only a quarter of organisations report that procurement policy is fully followed, with the remaining 75% experiencing challenges with policy implementation. Without consistent adherence, even well-designed frameworks fail to deliver their intended savings. Technology plays a role here: centralised platforms that enforce approval workflows, flag policy breaches and provide real-time spend visibility close the gap between policy design and operational reality. With the right procurement strategy, businesses can cut costs by 15 to 20%, drive compliance and make better purchasing decisions. 

The connection between spend control and business speed is direct. When procurement teams are managing fewer suppliers against cleaner contracts, cycle times shorten, decisions accelerate and resources are freed for strategic priorities. The 2025 Deloitte Global Chief Procurement Officer Survey found that nearly two-thirds of procurement leaders identify stronger supply chain visibility as a top priority for mitigating risk. Visibility, in indirect spend, begins with consolidation. 

​​​​​​​​​​​​​​This article is brought to you in association with Amazon Business.

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