Difference Between Direct and Indirect Procurement Process in SAP S4 HANA
Direct procurement refers to purchasing materials or goods that are directly used in the company’s core production or manufacturing process.
Example:
Buying raw materials, components, or semi-finished goods
needed to make the final product.
Key Points:
- Materials are linked to production or sales orders.
- Typically managed through MRP (Material Requirement Planning).
- Uses Material Master (type ROH, HALB, FERT).
- Involves inventory management, goods receipt, and invoice verification.
- Impacts COGS (Cost of Goods Sold) and inventory valuation.
Example Scenario:
A car manufacturer purchases engine parts or tyres to assemble
cars — this is direct procurement.
Indirect Procurement in SAP
Indirect procurement is for goods and services that support day-to-day business operations, not directly related to production.
Example:
Buying office supplies, laptops, cleaning services, or consulting
services.
Key Points:
- Not linked to production or MRP.
- Often uses consumption-based procurement (materials consumed immediately).
- Usually expensed directly to cost centers.
- Material types: NLAG (non-stock) or SERV (service).
- No inventory valuation or stock posting in most cases.
Example Scenario:
A company buying stationery or IT support services for employees
— this is indirect procurement.
🔹 In S/4HANA Context
- Both direct and indirect procurement can be managed via Fiori apps (like Manage Purchase Requisitions, Create Purchase Orders).
- Centralized procurement, guided buying, and integration with Ariba simplify both processes.
- Indirect procurement is often automated through self-service requisitioning (Fiori app: Purchase Requisition – Self Service).
