Understanding GFR VS GNFR
Those who work within a company’s accounting department know exactly how to account for direct and indirect spend without question. However, the same cannot necessarily be said for those who work outside of accounting.
Understanding the difference between GFR vs GNFR can be extremely helpful for addressing problems in each one’s respective supply chain, which is why we’ve laid out the similarities and differences between these two types of goods.
GFR and GNFR Defined
GFR, or goods for resale, refers to any purchase or direct labor going into the production of a product that will be sold to the customer. Retailers, for example, purchase finished products from manufacturers and distributors to resell, all of which are GFR.
GNFR, or goods not for resale, encompasses purchases that are essential to a company’s day-to-day operations but don’t directly contribute to the company’s revenue. For those in the retail industry, any purchased item not intended for consumers is labeled as GNFR.
How GFR and GNFR Differ
At first glance, GFR VS GNFR seems like a fairly straightforward concept—items purchased under GFR contribute directly to top-line revenue whereas GNFR does not.
However, there are many other characteristics that separate these two types of goods.
- The average cost of each and the percentage of the purchasing budget they make up.
As mentioned earlier in this blog series, GFR makes up roughly 80% of purchase dollars and 20% of suppliers. GNFR, on the other hand, constitutes about 20% of purchase dollars and 80% of suppliers.
With GNFR, there is a high transaction volume from the large number of suppliers and large number of purchases, despite the fact that such items are typically bought at lower individual dollar amounts.
In terms of numbers, GNFR is far higher in every regard but the absolute dollar value.
- The people involved in the procurement of each.
There are a number of both internal and external parties involved in the procurement of GFR and GNFR. However, that number is significantly higher when it comes to GNFR.
For starters, there are many more suppliers for GNFR than GFR, as the former tends to comprise a much wider range of goods.
Additionally, there are more internal decision makers involved in GNFR procurement. Influencers and purchasers are often scattered throughout an organization. Unlike GFR, not all GNFR purchases are made within the purchasing department, which makes tracking and managing costs a more difficult and complex task.
- The products and/or services they cover.
Given their respective definitions, GFR and GNFR should be fairly easy to separate based upon the goods and services they cover. However, as previously discussed, GNFR may consist of different pieces of a company’s operational puzzle depending on what categories they need to run their business.
For retailers, the distinction is quite clear: Finished products that are purchased and then sold to consumers are GFR, whereas all other items are considered GNFR.
For others, it’s not so cut and dry.
- How each one is managed.
For most companies, managing GFR is a simple, well-organized process. As fewer parties are involved in GFR procurement, the task of handling such purchases is much less complex, and Maverick spend issues are virtually nonexistent.
The same cannot be said of GNFR, as suggested earlier.
When you combine the various influencers involved in GNFR procurement with the diversity of the spend categories, it becomes apparent that GNFR is not nearly as easy to manage.
Therefore, companies need to look for alternative ways to track GNFR purchases and shipments in order to cut down on unnecessary spending, missed deadlines, and lost merchandise.
How GFR and GNFR Are Similar
An important characteristic shared by GFR and GNFR is the fact that both types of goods have a supply chain. This is worth noting because some individuals are under the impression that indirect spend (the umbrella under which GNFR falls) does not have a supply chain.
There is such a thing as an indirect supply chain; however, not all businesses have one. Service providers don’t have an indirect supply chain, but retailers and manufacturers do.
As such, GNFR faces all of the same problems as GFR in this respect.
There’s no question that GNFR and GFR are both extremely important and obviously interrelated. However, GNFR is fundamentally different from GFR as far as the rules, constraints, and environment that the former operates within.
This means that managing the GNFR purchases a company makes is more challenging.
Companies that want to lower their costs and increase their profitability need to implement indirect spend control by obtaining executive sponsorship, identifying and resolving high-risk expenditures, and changing behaviors throughout the organization.
By doing so, they can look forward to seeing a significant impact on their bottom line.
Lumatrak provides a full range of real-time On-Time Delivery Control tools to help better manage supplier and delivery performance from order to the final mile of your indirect goods supply chain. Provided in the cloud through its Software-as-a-Service (SaaS) offering and already connected to vast numbers of manufacturers and contractors, Lumatrak’s solution can be quickly implemented to complement and enhance any ERP, Strategic Sourcing and Procure-to-Pay systems.
To learn more about how a better GNFR-delivery management solution could save your company both time and money, contact the team at Lumatrak today.