{"id":3490,"date":"2016-02-08T23:53:31","date_gmt":"2016-02-08T23:53:31","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2016\/02\/08\/why-direct-spend-procurement-cost-savings-matters-more\/"},"modified":"2021-07-15T03:34:57","modified_gmt":"2021-07-15T07:34:57","slug":"why-direct-spend-procurement-cost-savings-matters-more","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/","title":{"rendered":"Why Direct Spend Procurement Cost Savings Matters More"},"content":{"rendered":"<p>I hope that you enjoyed the article \u201c10 Strategic Procurement Ideas.\u201d<\/p>\n<p>Don\u2019t miss updates on Procurement &amp; Supply Chain, Subscribe here!<\/p>\n<p>The first idea was \u201cReduce costs in a way that enables your organization to price its products\/services more competitively.\u201d<\/p>\n<p>I phrased this point in this manner because it is finally time to address some questions procurement professionals have been pondering for decades.\u00a0 Questions like:<\/p>\n<ul>\n<li>\u201cIf I buy 10,000 units of an MRO item like safety goggles and I save $1 per unit, is that less valuable than saving $1 per unit on 1,000 units of a purchased component for an item that my company manufactures?\u201d<\/li>\n<li>\u201cOn which categories should I be focusing my procurement efforts?\u201d<\/li>\n<li>\u201cDoes achieving procurement cost savings on direct spend matter more than procurement cost savings on indirect spend?\u201d<\/li>\n<\/ul>\n<p>Here\u2019s the conclusive answer\u2026<\/p>\n<p>In most organizations, it is generally more important to focus your procurement efforts on direct spend than indirect spend.<\/p>\n<p>A cost savings on a direct spend category is more valuable than a cost savings of equivalent value on an indirect spend category.<\/p>\n<p>The reason is this:\u00a0 if you reduce the direct cost of a product or service that your organization sells, then you have given your organization a valuable choice:<\/p>\n<ul>\n<li>Pocket the additional profit and continue selling the same number of units; or<\/li>\n<li>Reduce the price to the market\/customer and sell more units with the goal to achieve higher aggregate profits than selling the same number of units at a higher profit margin per unit<\/li>\n<\/ul>\n<p>If your organization is able to act upon the second option, it can produce an upward spiral.\u00a0 It can result in gains in market share.\u00a0 Enough gains in market share can put competitors out of business, which will result in even more market share and profit.<\/p>\n<p>While cost savings on indirect spend are certainly valuable, they don\u2019t produce the ripple effect on profits that cost savings on direct spend do.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I hope that you enjoyed the article \u201c10 Strategic Procurement [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":3999,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3490","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v19.4 (Yoast SEO v19.13) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why Direct Spend Procurement Cost Savings Matters More - Next Level Purchasing Association (NLPA)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Direct Spend Procurement Cost Savings Matters More\" \/>\n<meta property=\"og:description\" content=\"I hope that you enjoyed the article \u201c10 Strategic Procurement [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2016-02-08T23:53:31+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-07-15T07:34:57+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-009.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"1068\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"Why Direct Spend Procurement Cost Savings Matters More\",\"datePublished\":\"2016-02-08T23:53:31+00:00\",\"dateModified\":\"2021-07-15T07:34:57+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/\"},\"wordCount\":330,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"articleSection\":[\"Procurement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/\",\"name\":\"Why Direct Spend Procurement Cost Savings Matters More - Next Level Purchasing Association (NLPA)\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#website\"},\"datePublished\":\"2016-02-08T23:53:31+00:00\",\"dateModified\":\"2021-07-15T07:34:57+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.certitrek.com\/nlpa\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Why Direct Spend Procurement Cost Savings Matters More\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#website\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/\",\"name\":\"Next Level Purchasing Association (NLPA)\",\"description\":\"The Next Level Purchasing Association\",\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.certitrek.com\/nlpa\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\",\"name\":\"Next Level Purchasing Association (NLPA)\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png\",\"contentUrl\":\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png\",\"width\":149,\"height\":50,\"caption\":\"Next Level Purchasing Association (NLPA)\"},\"image\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.linkedin.com\/company\/next-level-purchasing-association\/\",\"https:\/\/www.youtube.com\/channel\/UCrNZYjcLcaNA4xMKQHEGamw\",\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\",\"https:\/\/twitter.com\/nextlevelpurch\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\",\"name\":\"Galo Matagay\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g\",\"caption\":\"Galo Matagay\"},\"description\":\"Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aenean consequat rutrum ipsum quis iaculis. Duis non porta purus, tincidunt tristique mi. Cras eleifend tincidunt mollis. Aliquam egestas velit vitae interdum egestas. Aliquam vel lorem egestas lectus porttitor volutpat nec sit amet enim. Nullam bibendum vestibulum imperdiet.\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Why Direct Spend Procurement Cost Savings Matters More - Next Level Purchasing Association (NLPA)","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/","og_locale":"en_US","og_type":"article","og_title":"Why Direct Spend Procurement Cost Savings Matters More","og_description":"I hope that you enjoyed the article \u201c10 Strategic Procurement [&hellip;]","og_url":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/","og_site_name":"Next Level Purchasing Association (NLPA)","article_publisher":"https:\/\/www.facebook.com\/NextLevelPurchasing\/","article_published_time":"2016-02-08T23:53:31+00:00","article_modified_time":"2021-07-15T07:34:57+00:00","og_image":[{"width":1600,"height":1068,"url":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-009.jpg","type":"image\/jpeg"}],"author":"Galo Matagay","twitter_card":"summary_large_image","twitter_creator":"@nextlevelpurch","twitter_site":"@nextlevelpurch","twitter_misc":{"Written by":"Galo Matagay","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#article","isPartOf":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/"},"author":{"name":"Galo Matagay","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa"},"headline":"Why Direct Spend Procurement Cost Savings Matters More","datePublished":"2016-02-08T23:53:31+00:00","dateModified":"2021-07-15T07:34:57+00:00","mainEntityOfPage":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/"},"wordCount":330,"commentCount":0,"publisher":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#organization"},"articleSection":["Procurement"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/","url":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/","name":"Why Direct Spend Procurement Cost Savings Matters More - Next Level Purchasing Association (NLPA)","isPartOf":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#website"},"datePublished":"2016-02-08T23:53:31+00:00","dateModified":"2021-07-15T07:34:57+00:00","breadcrumb":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/why-direct-spend-procurement-cost-savings-matters-more\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.certitrek.com\/nlpa\/"},{"@type":"ListItem","position":2,"name":"Why Direct Spend Procurement Cost Savings Matters More"}]},{"@type":"WebSite","@id":"https:\/\/www.certitrek.com\/nlpa\/#website","url":"https:\/\/www.certitrek.com\/nlpa\/","name":"Next Level Purchasing Association (NLPA)","description":"The Next Level Purchasing Association","publisher":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.certitrek.com\/nlpa\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.certitrek.com\/nlpa\/#organization","name":"Next Level Purchasing Association (NLPA)","url":"https:\/\/www.certitrek.com\/nlpa\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/","url":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png","contentUrl":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png","width":149,"height":50,"caption":"Next Level Purchasing Association (NLPA)"},"image":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.linkedin.com\/company\/next-level-purchasing-association\/","https:\/\/www.youtube.com\/channel\/UCrNZYjcLcaNA4xMKQHEGamw","https:\/\/www.facebook.com\/NextLevelPurchasing\/","https:\/\/twitter.com\/nextlevelpurch"]},{"@type":"Person","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa","name":"Galo Matagay","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g","caption":"Galo Matagay"},"description":"Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aenean consequat rutrum ipsum quis iaculis. Duis non porta purus, tincidunt tristique mi. Cras eleifend tincidunt mollis. Aliquam egestas velit vitae interdum egestas. Aliquam vel lorem egestas lectus porttitor volutpat nec sit amet enim. Nullam bibendum vestibulum imperdiet."}]}},"acf":[],"_links":{"self":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/3490"}],"collection":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/comments?post=3490"}],"version-history":[{"count":5,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/3490\/revisions"}],"predecessor-version":[{"id":13042,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/3490\/revisions\/13042"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/media\/3999"}],"wp:attachment":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/media?parent=3490"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/categories?post=3490"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/tags?post=3490"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}