In the first four articles in this series, we looked at the following themes:
- How committing to better manage tail spend can lead to significant cost savings
- Identifying a tail spend problem in your organization and segmenting the affected suppliers and transactions
- The relationship between the 80/20 (Pareto) rule, the “long tail” of sales and tail spend management
- Why it is important to prioritize, analyze, and have a system to better manage tail spend
In this article, the last in the series, we are going to turn our attention to what it takes to manage tail spend in such a way that “hidden” value is unlocked and costs are reduced. In a way, we are going full circle and returning to the theme in the first article – with good reason. Saving the organization significant amounts of money should be both the goal and the result of any activity that is focused on how to manage tail spend more efficiently.
On this topic, a piece titled Unlocking the Value of Tail Spend – How to boost benefits and efficiency through Advanced Tail Sourcing, by Hendrik Disteldorf, Tobias Fehre, Guttorm Aase, and Mike Piccarreta, published in the Supply Chain Management Review of March/April 2014 makes for very interesting reading.
In this article, the authors make a few very valid and interesting points; for example, that a tail spend management framework set up in the business helps unlock value by focusing attention on:
- The alignment of internal capabilities, processes and technology to better manage tail spend
- Making the tail spend more attractive to increase market competition and make pricing more competitive
The authors also mention three key considerations to be borne in mind when planning tail spend sourcing activities:
- Change management
The following interesting statement is made in the section dealing with skills:
“The skill set required for a tail sourcing specialist is very different than that required for a traditional market-oriented sourcing specialist.”
This is a viewpoint that some business managers will probably agree with, and others will disagree, believing the skill-set to be identical.
The report also goes on to say:
“The specialist is a challenging role to fill internally, as this person will be more junior with less sourcing experience but will require advanced analytical skills. Organizations seeking fast implementation should consider hiring from outside.”
With respect, we would like to disagree with the authors on this point. Trying to hire an external person in junior role (at a junior salary), that still has the capability and experience to manage tail spend properly and has “advanced analytical skills” sounds like a near impossibility. It is far better to partially or fully outsource this role.
Possibly, two years ago when this report was written, this option made sense, as mobile procurement systems and services were not as advanced as they are today, but the situation has changed.
Mobile procurement apps, like PocketBuyer™, coupled with service staffed by a team of experienced specialists that manage tail spend purchases on a daily basis, have changed things and given companies more options. Using a self-funding cost-per-transaction service makes much more sense than having a full-time employee dedicated only to tail spend purchases.