The two main categories of purchased goods are?

The correct choice of direct and indirect reflects a fundamental principle in supply chain management regarding the categorization of purchased goods.

Direct goods are items that are directly utilized in the production of a company’s finished products. This can include raw materials, components, and other necessary materials that contribute to the final output. Since these goods are essential for creating the end product, they play a critical role in the manufacturing process and are typically subject to stringent quality and supply chain standards.

Indirect goods, on the other hand, are items that are not directly incorporated into the final product, but are still necessary for the functioning of the business. These can include office supplies, maintenance tools, and services such as cleaning or administrative support. While they may not be directly linked to production, they are essential for the overall operations and efficiency of the company.

Understanding the distinction between direct and indirect goods helps supply chain professionals strategize procurement practices, manage supplier relationships, and optimize inventory levels effectively. This categorization also aids in assessing the financial implications and potential risks associated with different types of purchased goods.