Tail Spend Management and Why It Is So Important For Your Business

  • Phil McGuinness
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Discover the key strategies and best practices for effective tail spend management. With social and economic factors impacting inflation and with many organisations having a fundamental shift in priorities as sustainability and social responsibility increases, there are greater challenges being placed on Procurement. Due to these increasing demands, Procurement functions are now seeking additional opportunities to enhance organisational efficiency and additional cost savings; this is why Tail Spend identification and control has been identified as a top 3 priority by global CPOs.

What is Tail Spend Management?

Tail Spend is often regarded as the problem child of an organisation’s spend profile. In basic terms it is traditionally the 20% value of the spend profile of an organisation that accounts for 80% of the suppliers. It’s therefore often low value transactions and often high-volume orders and is largely made up of non-critical suppliers. Tail spend can cover Indirect and Direct categories. 

The nature of tail spend is one of a fragmented supply base that, due to the challenges and often limited resource Procurement departments can have, it is often not visible. A function like Procurement cannot control what cannot be seen.

Why should you look to control your Tail Spend?

When looking at the transaction value of a purchase of a product or service in isolation it is such low value that it is unlikely to come onto the radar of the Procurement team. The importance is to look at Tail Spend in a collective manner. Collectively the value and therefore the savings opportunity is likely to be of higher value than some of the ‘big ticket’ categories. 

In addition to the savings opportunity, the nature of Tail Spend is that it is often managed by ‘local’ departments and therefore prices are obtained and orders placed by teams with little or no professional procurement experience.  Due to this, organisational risks around purchases being made out-of-contract and also compliance can also be commonplace, and therefore put your organisation at risk. 

How can Barkers help?

At Barkers we combine spend analytics with professional expertise to deliver excellence for our clients.  Senior members of our team are Chartered MCIPS, FCIPS or equivalently qualified with relevant Honours Degrees, MBAs and PhDs based on research completed in areas relevant to the advancement of procurement and commercial best practice.   

Our senior delivery resources come from a background of industry leadership with hands on experience of leading and developing complex procurement and commercial teams. Our advice is based on years of hard-earned practical experience so you can be confident that the strategies and methodologies we recommend will hit your budget, timescales and objectives. 

We recognise that one size does not fit all and this is certainly relevant in Tail Spend management.  Our approach is simple. We work in partnership with our clients to: 

  • Identify and analyse tail spend  
  • Agree scope and opportunity 
  • Utilise our ‘Procurement As A Service’ expertise to deliver savings, consolidation and control improving compliance and reducing risk 
  • Develop tailored category strategies that will shape and manage future spend and mitigate the reoccurrence and burden of expanding tail spend
  • Manage tail spend on your behalf on an ongoing basis.

What are the benefits?

Due to the nature of how Barkers work, and the expertise we have within our team, we deliver multiple benefits for our clients. Specific to Tail Spend, common achievements are:

  • Enhanced visibility of your spend profile
  • Increased savings
  • Immediate access to leading Procurement professionals
  • Increased compliance and enhanced governance
  • Reduction of the administrative burden of tailspend
  • Achieving better economies of scale through consolidation
  • Easing the management of compliance with company policies in the supply chain eg ESG, modern slavery, living wage.

Let Barkers support your tail spend management

Author: Phil McGuinness