Direct sourcing refers to the purchase of raw materials, goods and services that are used in a business’s core operations. Goods and services that are obtained through direct sourcing become part of the final product that is offered to end users.
A car manufacturer, for example, needs specific kinds of steel and plastic that are eventually fitted into its vehicles. The procurement of these materials can be called direct sourcing. Because these materials are vital for production, direct sourcing is generally managed in-house by a central procurement team.
Direct sourcing stands in contrast to indirect procurement, which refers to the purchase of goods, services, supplies and materials that are needed for the running of a business but don’t end up in the business’s final product.
Learn more about GEP’s direct sourcing software.