Keeping It Simple: how to effectively manage your tail spend

Published November 2014

There can be significant benefits of getting tail spend under control. Not only cost savings, but reduced supply risk, time savings, better compliance and improved satisfaction.

When it comes to buying low cost products and services simplicity is everything. Do you find it difficult to effectively manage your tail spend ? The ‘tail’ is characterized by infrequently ordered, low cost products and services ordered by a large number of employees from a large number of suppliers. The tail includes professional services, marketing, maintenance & repairs and office supplies and can make up 20% of total expenditure. These transactions are too small to require procurement’s intervention but also too broad and ad hoc to be effectively cataloged. Procurement professionals struggle to bring this spend under effective management because demand is often unpredictable and spread across every part of a business. In the absence of alternatives, employees simply phone, email or search online for suitable suppliers and products. Each order may be just a few hundred or a few thousand pounds but they can be significant in number, all adding up to a large and difficult problem to deal with. So what’s the solution? Procurement leaders have traditionally found the ‘tail’ can wag the dog. It’s not an easy problem to solve. Some businesses have implemented purchasing controls to ensure they can monitor purchasing, but this approach fails to prevent or influence the order in the first place. Other’s have set up specialist spot buying teams, outsourced the spend to third parties or tried to implement all encompassing catalogues with mixed results. Many have simply ignored the problem and gone after easier to reach categories or more strategic purchasing. Your employees are currently searching online, sending some emails and making a few phone calls. Suppliers are keen to win their business so inevitably make it easy to buy from them, rather than a competitor. As a result most organizations simply don’t know how much they spend. They cannot assess demand or influence buy decisions. They suffer from the manual menace. So your solution has to be quicker and easier than an online search. The solution has to give employees pricing for anything they need. Whether it’s an engineer to fix the photocopier, furniture for a new office or an information pack for a new hire, employees won’t buy from a catalog if the catalog doesn’t stock the products or services they need. Expecting them to log into multiple catalogs from different vendors is a barrier to adoption. And what if your approved supplier is out of stock? Your employee will resort to their old ways and not return to the desired process. Custom requirements also need to be captured. There are many needs which can’t be cataloged and can only be specified as the need arises. Any solution implemented should make it easy for novice buyers to accurately specify and gain prices for ad hoc needs. The right tools for the job The solution has to be simple. It has to be easy. Web enabled procurement services could provide the answer. Cloud based platforms can be accessed by large numbers of users via the internet and so can scale across an organization locally, nationally or even globally. By their very nature, suppliers can access the platform to receive and respond to bid requests, self-manage their product and service catalogs and receive orders. They are easier to use than traditional enterprise sourcing and procurement solutions. Employees like the familiar online shopping experience as its quick and easy. So they adopt and use, rather than stay with manual buying. Centralized procurement teams can set the rules and leave it to the system to control local purchasing within defined parameters. Any transaction falling outside of any permissions set require approvals. Users can simply enter their needs, just like an online search engine or navigate to products and services published by suppliers to a global, supplier neutral catalog. Users can select from the products displayed or specify their custom requirements, using a simple questionnaire. Expertise on Demand For many organisations, novice buyers are involved in specifying, evaluating bids and placing orders. Departmental heads often delegate the process to juniors, who are inexperienced at defining needs, don’t have sufficient experience of selecting suppliers or fully assessing pricing. For some transactions, not much expertise is needed, however for custom requirements or more complex orders some expertise is essential. Web enabled procurement services provides the flexibility for self-service ordering directly from suppliers, assisted buying where expertise is provided ‘on demand’ or a fully managed service. Rather than wholesale outsourcing forward thinking businesses require flexibility on a transaction by transaction basis. For simple, repeat or ultra-low value ordering, employees can be guided through a best practice procurement processes. For more complex requirements, more diverse supplier proposals or higher value decisions, employees can call on assistance from pre-approved experts from within the client organization, elsewhere in the supply chain or from specialist consultants. Where a larger project demands, the right solution can facilitate full outsourcing to a procurement services provider.

So what so you need to effectively manage your tail spend ?

The right tools for the job. The right supplier for the right requirement. Each time, every time. Simple.