Indirect Purchases, what they are and
their importance in the sales process

When you set up a company, you not only want it to be cost-effective, but also to have the chance to grow and report the highest possible profit. For this to happen, you have to manage your resources effectively and pay special attention to the purchases made within your company.

A company’s purchases can be classified into two types. On the one hand, there are the direct purchases, or the incorporation of products or services for selling later. A vehicle manufacturer might have to acquire steel and aluminium magnesium alloys, plastics, thermosetting resin, chips, glass and other components to produce their cars, as well as recruit the staff qualified to process those resources. Indirect purchases, on the other hand, involve obtaining material to prepare assets intended for market. In both cases, developing and implementing an appropriate strategy is key.

Why do you need to have the right indirect costs process?

Internalising the impact of correctly controlling direct purchases is common. This type of outlay is related to the production chain, which is why it’s easy to monitor, making sure everything goes to plan.

Having said that, we don’t usually consider  acquisitions of indirect services to be as important. You make them daily, which is why not having the right supplier strategy and management can have notably negative consequences.

However, if all the above is done correctly, the savings on those purchases can be as high as 20%. That means you ensure they are not only cost-effective, but that your budget will also be lower than expected. There are certain practices you can implement to achieve this:

  • Detect sales trends and patterns that track consumer demands.
  • Use audits to adapt the products and services catalogue to the marketing process.
  • Set up an automated data flow that is coordinated with the sales record.

When you have the right purchasing process, you minimize human error. You need to be one step ahead of your business’ needs to be able to respond to them before your consumers even notice. Otherwise you’ll lose them to your competitors if they’ve found a way of providing them with a solution.

Classification of direct and indirect purchases

Keep in mind that indirect purchases for one company may well be direct ones for another. For a transportation business, paying for fuel is a direct expenditure, whereas for a business that only makes occasional trips it would be an indirect expense.

The same vehicle manufacturer we mentioned above will also require a language services provider to translate their instruction manuals, as well as their point-of-sale materials, component data sheets, websites, and their corporate and promotional multimedia content for every product and campaign.  This service might be considered a direct or indirect purchase depending on how the translation is used.

The importance of choosing the right language services provider

All companies who sell their products in foreign markets have to hire translation services, no simple task if their purchasing department doesn’t have a bird’s eye view of the company’s translation needs. Usually each department has its own budget for translating and localizing their content, but with extremely different points of view regarding the service.

In the translation industry rates are usually quoted by the word.  This type of price/word negotiation could significantly reduce other profits for some departments, which may even result in the generation of additional costs.

Understanding the types of content used by the company and the translation work flows is vital since it lets purchasing departments ensure that the language services agency chosen can provide the people requesting them with maximum value and minimum costs.

Choosing a language services provider is part of a strategy that should be addressed. A defective partnership is a recipe for an obstacle-strewn work flow and a less-than-ideal relationship with the consumer.

When a product is launched internationally, communication plays a key role in its success. If the message fails to flow in the target language in the same way it does in the original language, the product will appear far less attractive to its audience. At tsd we offer you our wide experience in translation, localization and interpreting services in numerous sectors, and our professionals work closely with the customer to optimize the work flows of your company’s language needs.