What is tail spend?
It is that spend of an organization which is not actively managed or any purchase that falls outside of the typical ongoing and large purchases that make up approximately 80% of transactions but only 20% of the total spend volume. Every organization and business unit’s spending are unique- what is considered tail spend in one category may not be the same in another. These purchases are often too small to go through procurement and are not frequent enough to be included in catalogued systems.
Some areas Of scoped tail spend
Managing tail spend & why
Tail Spend is often seen as too complicated to address for many reasons. The most difficult part of managing tail spend is lack of data visibility. This happens as a result of multiple factors, often because procurement and contract management run on separate systems, silos within the organization that may be using the same vendors and other resources, using a high number of suppliers, and operating under decentralize policies.
Significant analytical capabilities are needed both in extraction and cleansing of the data and in performing the spend analytics. There is a compelling need for technology to automate significant amounts of work to get better results.
In our experience we have found that most companies can realize significant cost savings and benefits from tackling tail spend management. According to a recent study, more than 27% of companies said that they experienced savings of 5% to 10%, while 30% of companies had savings of at least 10%.
Benefits of managing tail spend
What does your organization need?
Over the years, there is a growing awareness on cost reduction and saving, hence bringing the tail spend under better management should be the top priority of the organizations. Various research reports show that the potential to reduce transactions is usually achievable by using a systematic software solution that can bridge the gap between expenditure and revenue of the organization.
How can Think Analytics help?
Supply360 provides a vast array of capabilities that help procurement professionals attain the most out of their sourcing activities. Our solution aims to help you centralize your information and negotiate the best value for your deals. Get in touch to know more!