Up until recently, most companies focused almost all of their procurement effort and analysis on their biggest suppliers and purchasing categories, basically the 20% or so of suppliers or categories that consume 80% of the total procurement spend.
There is a growing awareness, though, among business operators and procurement professionals of the need for internal controls and procedures that make it possible to better manage tail spend in the organization.
However, not everyone is totally clear on exactly what tail spend is, and why there is such a fuss about managing it better. Basically, tail spend is the bottom 20% of procurement spending by value. In many cases, up to 80% of a business’s suppliers reside in this area.
For a more comprehensive guide explaining what tail spend is, why there is so much interest in the concept, and why it is critically important for companies of all sizes to actively manage tail spend, please refer to an article I wrote for Spend Matters, titled 10 Things You Always Wanted to Know About Tail Spend.
In this article, I discuss the following 10 points about tail spend:
- Tail-spend is about the “tail”!
- Tail-spend is not (only) about the tail
- Small spend does not mean small supplier
- Tail affects everyone
- The power of small numbers
- Instant savings
- Cost avoidance
- Supplier reduction
- Enables community sourcing
- Compliance and risk management
I hope the article makes you think about how well your organization manages tail spend and where the opportunities are to improve on the way ad hoc purchasing is performed in your business.
A commitment to better manage tail spend can “kill many birds with one stone” in an organization, i.e. the effect of this practice often goes beyond the obvious and opens up many opportunities for cost-saving and efficiency improvement.
If you are looking for a simple, no-fuss way to better manage tail spend in your organization, the PocketBuyer™ app from Simfoni is the ideal starting point.