Efficio: Indirect Spend Erodes Supply Chain Oversight

Indirect spend makes up a huge slice of business expenditure, yet many procurement and finance leaders admit they have little control over it. This type of spending – covering areas like IT, marketing, facilities and consultancy – isn’t tied to core product or service delivery but is essential to daily operations.

According to Efficio, a procurement and supply chain consultancy, the majority of Chief Procurement Officers (CPOs) and Chief Financial Officers (CFOs) say more than a quarter of their organisations’ indirect spend happens without financial oversight.

In fact, only 19% of those leaders say they are "fully confident" they have an accurate picture of how much is being spent and where. The result is not only budgetary blind spots but mounting risk, waste and inconsistent supplier engagement.

A major share of spend happens without control

Efficio’s data finds 89% of CPOs and CFOs believe more than half of indirect spend in their organisations is "unaddressable" – meaning it falls outside their influence or ability to manage.

Yet, indirect spend typically represents close to half of total business expenditure. With that much capital flowing through unmonitored channels, the impact on the supply chain becomes hard to ignore.

Indirect spend includes everything from technology licences and office supplies to professional services. While direct spend focuses on goods and services used to deliver an end product, indirect spend supports the internal machinery of a business.

When oversight slips, that machinery slows, leaks or duplicates itself unnecessarily.

Procurement teams, typically focused on managing direct suppliers, often fail to fully engage with indirect categories. The fallout includes duplicated contracts, inconsistent pricing and overreliance on one-off suppliers.

Meanwhile, internal teams may bypass procurement altogether, placing orders directly with vendors and undermining frameworks designed to protect value.

Tim von der Decken, Vice President at Efficio, says: "Organisations are under pressure to control costs and maximise efficiency, yet a surprising amount of indirect spend remains unmanaged.

"Much of what leaders consider ‘unaddressable’ may actually be controllable if they have greater visibility, structured review processes and stronger alignment between procurement and finance teams. The challenge often isn’t the spend itself – it’s the lack of insight, governance and accountability to manage it effectively."

Efficio estimates organisations could reclaim up to 15% of currently wasted spend simply by reviewing their indirect purchases more regularly.

However, only 19% of procurement and finance leaders say they undertake annual reviews. Without those checks, avoidable costs creep into budgets, draining resources without clear return.

Indirect spend climbs the boardroom agenda

This lack of oversight is catching the attention of business leaders. Efficio finds that 93% of senior procurement and finance professionals agree that indirect spend either already is or should be discussed at board level. For those who disagree, a third plan to raise the issue themselves.

Skills development is a central focus. According to the research, 85% of leaders rate procurement capability-building as a top priority. That’s because managing indirect categories requires a deeper understanding of supplier markets, contract details and demand behaviour across departments.

Simon Whatson, Vice President at Efficio, says: "Too often, indirect spend is the blind spot in corporate budgets, but our research shows that without proper oversight, organisations are losing millions to unmanaged purchases.

"The good news is that these challenges are solvable. By improving visibility, strengthening procurement capabilities, and creating stronger collaboration between finance and procurement teams, businesses can turn indirect spend from a source of risk into a driver of measurable savings and operational efficiency."

Rising inflation and growing scrutiny over how funds are allocated mean organisations must squeeze more value from every dollar spent. For many, indirect spend becomes the next big area for financial discipline.

Technology and professional services most exposed

When asked where leakage is most likely to occur, 81% of leaders point to IT and software, while 68% identify professional services. These categories often involve complex vendor relationships, evolving needs and multiple internal stakeholders.

Procurement teams may struggle to track changes, especially when purchases are made across departments without standard procedures.

The study also highlights the issue of maverick spend – where employees make purchases outside of agreed channels. This kind of spending is flagged as a major problem by 93% of respondents. It creates risk not just in terms of price but also in compliance and supplier management.

Without consistent procurement involvement, businesses risk breaching contracts, missing out on volume discounts or paying over the odds.

Indirect spend, then, becomes more than just an administrative headache. It exposes businesses to financial inefficiency, supplier fragmentation and operational friction.

Efficio’s findings present procurement and finance leaders with a choice. Either continue treating indirect spend as background activity or bring it into strategic focus, applying the same standards of control, governance and performance as direct spend.

For those willing to put indirect categories under the spotlight, the rewards could be substantial.

With the right processes, reviews and cross-functional cooperation, organisations can tighten supply chains, reclaim lost value and build a clearer picture of their cost base.