Direct materials are components that go into a manufactured product. For example, components such as the screen, integrated circuits, camera modules and buttons are the direct materials involved in the production of a smartphone.
This stands in contrast to indirect materials, which are items that are involved in the overall manufacturing process but don’t end up in the final product.
Direct materials procurement is considered high stakes as it critically impacts supply chain efficiency, customer sales, and ultimately, the top and bottom lines of a company. And in today’s highly dynamic, globalized supply chains, managing direct materials expenses is way more than a business priority; it’s also a way to gain strategic competitive advantage.