Tail Spend Challenges
Tail Spend usually constitutes the 20% of spend that is ignored and not actively managed. It is usually composed of low value, low volume and non-critical commodity products. These products could be anything like uniform, apparels, office furniture, or papers.
According to Michael Lamoureux, phd, companies usually choose to disregard these tail spend products and manage them inefficiently, which opens them up to potential risks. These risks could be but are not limited to, discount losses, high processing costs, liability risks, reputational risks, financial liquidity risks, compliance risks, corporate social responsibility risk, fraud risks and many more.
Organizations try to overcome these risks through different methods and techniques. However, due to the fact that tail spend management is a highly complex operation, it is considered difficult to manage. This complexity is due to the fact that tail spend consists of thousands of spend categories, suppliers tend to be dispersed in different geographic locations and there are many transactions involved.
An effective logical tail spend solution is needed for efficient tail spend management. E-procurement platforms help in implementing solutions by managing tail spend efficiently. An e-platform will be dedicated to centralizing, organizing and streamlining spend making it more efficient. This is done by a single customizable platform with integrated catalogues and analytics, rate card support, e-invoicing and reporting platform.
Implementing the right platform will yield considerable benefits. These benefits include: significant savings opportunities, high return on investment, reduced risk, customer satisfaction and better supplier management.