What Is Tail Spend again?

Tail spend refers to the many small, often ad-hoc purchases that organizations make from various suppliers. While each individual transaction may not seem significant,collectively, they can account for a substantial portion of the total procurement volume. Often only 5% of the total procurement volume represents 50% of the supplier base! Of waste of time and effort?

Why Is It Relevant?

Hidden Costs: Tail spend will lead to hidden costs, such as inefficient processes,wasted time and resources, unnecessary expenditures and a lot of supplier created in your ERP.

Savings Potential: Effectively managing tail spend offers significant savings opportunities:

* By more governance companies will buy less. Not buying something is the biggest saving!

* By improving your processes and tools, less people will be occupied by managing these tail purchases (in the business, in procurement AND in finance)

* By having your people focusing on the core business, beyond procurement more value will be created and within procurement more savings on strategic contracts will be achieved.

* By consolidating certain purchases you can have better prices. That will not be the biggest win, but even a small reduction in costs can have an interesting impact on overall profitability.

How CanWe Manage Tail Spend?

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‍Technologies:

Utilize partners with modern technologies like catalogues, AI and spend analysis tools, to gain insights and efficiencies into your tail spend. This helps to identify patterns and opportunities.

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Consolidation:

Consider working with consolidators that replace thousands of suppliers to reduce complexity, to scan the market for competitive prices and to improve the buying experience for the business.

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Standardization:

Implement standardized processes for small purchases to gain efficiency, reduce risk and to win in Working Capital by protecting your standard payment terms. Very often these purchases require immediate or on-line payments.

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The Future of Tail Spend

With ongoing digitization, advanced analytics tools and the right partners, companies will increasingly be able to manage their tail spend and unlock value. 🚀💡

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