How to reduce indirect spend, in order of effort

Published 17 September 2026 · 6 min read

Indirect spend is where cost reduction is least painful, because almost none of it touches headcount or the product. It is also where most organisations have the least visibility, which is why it survives untouched through rounds of cuts elsewhere.

Why indirect is the easier target

Direct spend is engineered in. Changing it means requalifying materials, revalidating suppliers, sometimes redesigning the product. Indirect — facilities, IT, professional services, travel, stationery, MRO — can usually be renegotiated or consolidated without anyone outside procurement noticing.

It is typically 15–40% of total spend and is often managed by nobody in particular.

The five moves, in order of effort

Consolidate duplicate suppliers. Same commodity, several vendors, different prices. Aggregating volume onto fewer suppliers typically saves 6–14% on the affected spend and needs no policy change. Start here.
Bring off-contract spend onto existing contracts.Often a communication problem rather than a commercial one — people buy elsewhere because they did not know the contract existed.
Standardise specifications. Eleven variants of the same glove is eleven part numbers, eleven order lines, and no volume leverage on any of them.
Reduce transaction cost on the tail. P-cards, catalogues, consolidated ordering. The saving is process, not price, and on high-volume low-value categories it is usually larger.
Tender the leverage categories. Highest return, highest effort, and only worth it where there are genuinely competing suppliers.

What to avoid

Blanket percentage cuts. “Everyone reduce indirect by 10%” gets met by deferring spend into next year, not removing it.
Squeezing strategic suppliers. Short-term win, long-term risk. See the Kraljic matrix.
Counting avoided spend as savings without labelling it. Finance will find it.
Starting with a tender. It is the slowest move on the list and rarely the first one worth making.

You cannot do any of it without visibility

Every move above starts with the same question: what do we buy, from whom, and how often? Duplicate suppliers are invisible until spend is categorised; off-contract buying is invisible until you can compare spend to contracts; specification sprawl is invisible until eleven glove variants sit in one category.

This is why indirect savings programmes stall. The strategy is not the hard part — the data is, and the strategy without it is guesswork dressed up as a plan.

A realistic expectation

A first pass at indirect spend in an organisation that has never analysed it typically identifies 5–15% of addressable spend as actionable. Not all of it converts. Size it honestly, and see calculating savings credibly before you put a number in front of a CFO.