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One of the interesting things about consistently reading and hearing content from quality sources is that you start to notice trends. It is amazing how often the same topics arise at the same time in different places. We use this blog as a way to help you stay on top of the major themes in procurement and supply chain management.
Webinar Notes: Tail Spend Management - How to Squeeze Savings from the Most Fragmented 20% of Spend
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.
Proactis 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?
- 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.