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Webinar Notes: Tail Spend Management - How to Squeeze Savings from the Most Fragmented 20% of Spend

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This week’s featured webinar is ‘Tail Spend Management: How to Squeeze Savings from the Most Fragmented 20% of Spend’ by Proactis. If you are interested in more after reading our notes, you can access a white paper on Proactis’ site.

 

Dog TailProactis started the event by sharing their definition of ‘tail spend’: spend that is fragmented by any of a number of factors such as geography, business unit, or supplier, or is off contract (maverick) spending or low value high transaction count spend. 

Another way to explain tail spend is by showing you an image (below). As the spend of in each category diminishes, the graph shows a long ‘tail’ where you have highly fragmented spend, no piece of which is easily negotiated on its own.

When looking at opportunities to decrease the cost of fragmented spend to your organization, only part of the cost is represented by the spend with suppliers. Much of the cost is reflected by internal transaction processing costs and time usage.

Why is the Spend in the Tail?

Although there are a number of strategies for bringing tail spend under management, the first step is determining why each block of spend is in the tail and hopefully remove it.

Is the spend categorized incorrectly?

Should the spend be put through an in-place purchasing card program?

Can you run one time auctions?

Is the spend maverick and therefore a compliance issue?

Can you consolidate the spend by rolling it into related contracts or on-contract suppliers that provide what is being purchased?

Practical Steps:

  • Look to see if the tail end spend is falling through the cracks of systems in place.
  • Take a category driven view to pick up ‘stray’ spend that would be left unmanaged if the spend is managed by existing contract or supplier.
  • Consider outsourcing your tail spend to category specialist or service firms that will manage it on your behalf.

     

Kelly is the Managing Editor of Buyers Meeting Point. She has a unique perspective on procurement from her experience on both sides of the negotiation desk. She has led projects involving members of procurement, supplier and purchasing teams. She has practical skills in strategic sourcing program design and management, opportunity assessment, knowledge management, and custom taxonomy design and implementation. She also has direct sourcing experience in a number of product and service categories including: inventory fuel, location-based services, corrugated, and corporate purchasing cards. Kelly has her MBA as well as an MS in Library and Information Science.

Comments

  • Rick Ankrum
    Rick Ankrum Saturday, 25 February 2012

    I like to refer to this spend as the long tail purchases. Anything that can automate this will help gather information to help form a strategy. Using the various online ordering this could be the way.

    Rick Ankrum
    eBook author
    "Strategically Sourcing Electricity in Deregulated Markets"
    "Small Package Freight Agreements Deconstructed"
    http://3MailAt.com">http://3MailAt.com" rel="nofollow">http://3MailAt.com">http://3MailAt.com

  • Rick Ankrum
    Rick Ankrum Saturday, 25 February 2012

    Correct my typographic error: Using the various online ordering offerings could be the way.

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