Cost accounting was originally introduced during the Industrial Revolution so that businesses could organize their operational/manufacturing costs to price their products in order to turn a profit. Though indirect spend is a term that was coined during this time, GNFR—a subset of indirect spend—is a more modern phrase in the procurement world.
GNFR, or goods not for resale, is often a difficult concept for individuals to comprehend. This is largely due to the fact that companies define GNFR in a number of different ways.
The Difficulty with Defining GNFR
One of the problems with defining GNFR is how companies choose to apply the term internally. Some use GNFR to refer to all the goods and services they purchase from third-party suppliers. Others define GNFR as supplies only, with other areas categorized in a more specialized way. And some choose not to use the term at all.
Unfortunately, this means there is not a standard definition that all companies use. To combat this issue, we’ve provided a clear description of GNFR and explained how it falls under the more comprehensive term of indirect spend.
What Is GNFR?
To put it simply, GNFR refers to the various goods and services that are integral to a company’s operations. These goods may not factor into the direct cost of manufacturing a product or purchasing a finished good for resell, so they are considered indirect costs.
For example, a product cannot be manufactured without the factory in which it is built, making the factory an indirect cost. The goods and services purchased from outside vendors to keep the factory operational (utilities, shelving for materials, office supplies, etc.) are GNFR.
It’s important to note that GNFR is defined in the same way regardless of what industry a company may operate in. However, the difference lies in what categories companies need in terms of running their business, along with the amount they spend on each category.
GNFR in Retail
Every retailer, regardless of what their niche may be, purchases physical, finished products (goods for resale