What is tail spend
Tail spend includes all purchases a company makes that are not strategic in nature, relatively low in value and above all, are spread across the entire organisation. Typically, these sorts of purchases are made quickly, by different people in the organisation. They pay little, if any, attention to company rules or requirements, the conditions of the purchase or the background of the supplier. The purchaser’s needs are well served, but their colleagues, who then have to process the administration, find themselves with an unduly large amount of work.
It’s because tail spend relates to small and relatively unimportant purchases that there’s so little control over it. Companies typically focus on large, strategic purchases. As a result, inefficiencies in the tail stack up.
In a lot of companies, there’s no awareness of the issues and invisible costs that tails pend brings
Invisible costs
These unchecked purchases don’t really make anyone in your company any happier. The financial service needs to process a thousand and one invoices with a thousand and one different payment terms and conditions. An invisible cost.
The purchasing department is not particularly thrilled about these loose ends either. Because although they may be small purchases, the follow-up ends up costing the purchasing department a lot of time. After a purchase, they often need to resolve discussions about payment terms, extra costs or incorrect deliveries. And as such, no one from the purchasing department really wants to be involved with these sorts of purchases.
To get a little bit of control, companies often enter into large contracts with strategic suppliers. But the user -the staff member, manager or director who needs something specific- is not so thrilled by this approach. They want to organise an event with Event Agency A, which has good ideas. But the purchasing service has a contract with Event Agency B. The user wants service, flexibility and speed.
How to solve the puzzle?
Spot Buy Center is motivated by the idea of making things as easy as possible for clients. Because even if tail spend doesn’t relate to strategic matters, it’s still important to keep it under control! Contact us to see how we solve the tail spend puzzle.
