4.1 Indirect Spend Taxonomy + Ownership

Indirect spend—items that do not go into the finished product—is the silent killer of factory profitability. While Direct Material (BOM) is scrutinized to four decimal places, Indirect Spend (MRO, Tools, Services) often bleeds cash through "death by a thousand cuts." Without a rigid taxonomy, Procurement devolves into a personal shopping service for the engineering floor, chasing Amazon links instead of negotiating contracts.

The Spend Taxonomy (The Buckets)

We categorize spend to assign the correct approval logic. Every purchase request (PR) must tag a specific bucket. If it doesn't fit a bucket, it doesn't get bought.

MRO (Maintenance, Repair, Operations)

• Scope: Spare parts for machines (feeders, belts), lubricants, SMT wipes, PPE (gloves, masks).
• Nature: Consumable. Recurring.
• Owner: Maintenance Manager / Production Supervisor.

Tools & Fixtures (Durable)

• Scope: Hand tools (Torque drivers), ESD mats, microscopes, soldering irons, custom test jigs.
• Nature: Durable (Asset Life > 1 year) but Low Value (< $2,500). Requires tracking but not depreciation.
• Owner: Process Engineering Lead.

Calibration & Services

• Scope: Metrology labs, ISO auditors, equipment repair contractors, pest control.
• Nature: Service. intangible outcome.
• Owner: Quality Manager / Facilities Manager.

Packaging (Non-BOM)

• Scope: Bulk shipping cartons, packing tape, bubble wrap, pallets. (Distinct from "Product Packaging" which is Direct).
• Nature: Variable cost linked to shipment volume.
• Owner: Logistics Manager.

IT Hardware & Licensing

• Scope: Laptops, servers, barcode scanners, SaaS subscriptions (Jira, CAD licenses).
• Nature: Asset or Subscription. High security risk.
• Owner: IT Director (Mandatory technical veto).

CAPEX-Lite

• Scope: Small equipment ($2,500 – $10,000). e.g., A new rework station or stencil printer.
• Nature: Capital Asset. Requires ROI justification but follows a faster approval path than Major CapEx.
• Owner: Operations Director.

Ownership & Approval Map

Define the "Delegation of Authority" (DoA) to prevent bottlenecks while maintaining control.

Spend Bucket	Value Threshold	Who Approves? (Budget Holder)	Who Buys? (Execution)	Mandatory Evidence
MRO / Spares	< $500	Shift Lead	Buyer / Admin	Part #, Machine ID
MRO / Spares	> $500	Maint. Manager	Sr. Buyer	Quote, Last Price Paid
Tools	Any	Eng. Manager	Buyer	Justification (New Line?)
IT / Software	Any	IT Director	IT Procurement	Ticket #, Spec Match
Services	Annual Contract	Plant Manager	Commodity Mgr	SOW (Statement of Work)
CAPEX-Lite	> $2,500	VP Ops + Finance	Sr. Buyer	ROI Calculation / Asset Request
Emergency	Any	Plant Manager	Any Available	"Line Down" Ticket

The "No-Go" Rules

Enforce these blockers to stop the "Personal Shopper" dynamic.

1. The Amazon Ban: Procurement does not use consumer accounts for industrial supplies.
   • Why: No tax exemption, no invoice traceability, difficult returns.
   • Exception: Urgent "Line Down" spot buy with P-Card (Credit Card).
2. The "IT Shadow Spend": Engineering cannot buy software or laptops on expense reports.
   • Why: Cybersecurity risk and license non-compliance. IT must procure ALL silicon and software.
3. No "Generic" Descriptions: A PR for "Stuff for the lab" is rejected immediately.
   • Requirement: MPN, Link, or Quote required.

Mandatory Evidence for Purchasing

Procurement is a transaction engine, not a research department. The Requestor must provide the "Ticket to Ride."

If Request is MRO/Tool:

• Then Provide: Mfr Part Number + Target Supplier + Needed Date.

If Request is Service/Calibration:

• Then Provide: Scope of Work (SOW) + Vendor Contact + Date of Service.

If Request is CAPEX-Lite:

• Then Provide: Asset Tag Request Form + ROI (e.g., "Saves 4 hours labor/week").

Final Checklist

Control Point	Requirement	Critical Threshold
Taxonomy Tagging	Every PR assigned to a Category	100%
IT Lockout	IT Hardware requests routed to IT	Mandatory
Approval Logic	Thresholds enforced by ERP	Automated
Quote Policy	3 Bids required	If Value > $5,000
Asset Tagging	CAPEX-Lite items tagged on arrival	> $2,500 Value
Rejection Rate	PRs returned for "Bad Data"	Tracked Metric