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WHAT IS TAIL SPEND MANAGEMENT?
Tail Spend refers to all the unmanaged transactions that take place within an organisation. It involves small value or invisible purchases that an organisation makes outside of their contracts with their core suppliers and often outside of the awareness of the procurement team. Even though each of these purchases may not seem like a lot, they can add up to a huge amount of money. It could be millions of dollars spread out across many different suppliers. Surprisingly, companies often pay little attention to this when trying to save money on their purchases. Furthermore, tail spend includes more than just small expenses; sometimes, it involves bigger purchases that departments make to quickly fulfil a specific need in the business. The problem is that mishandling this tail spend can cause headaches for the procurement, finance, and warehouse teams. They might need help to match paperwork, track when things arrive, and figure out who’s responsible for the purchase. Another issue is that buying things outside of the usual contracts can put the company at risk of violating regulations and potentially engaging in fraudulent activities. It’s crucial to understand and manage this type of spending properly, as doing so can save money and ensure everything runs smoothly in the company.
A FOCUS ON THE SMALL THINGS
The tail spend category consists of a number of other categories, including temporary staffing for administrative, customer service, and auxiliary roles, as well as shipping and freight costs for small packages and parcels, professional services, including legal, accounting, and consulting, as well as utilities and telecommunications expenditures encompassing phone, internet, and electricity bills. Tail spend comprises a multitude of small purchases spread across various vendors, making it challenging to oversee and monitor. This is where the significance of tail spend management services becomes evident.
THE SIGNIFICANCE OF TAIL SPEND MANAGEMENT
- Cost Savings: By optimising tail spend, organisations can achieve substantial cost savings that contribute directly to the bottom line. Consolidating and rationalising these small purchases can lead to bulk discounts, reduced transaction costs, and improved supplier negotiation power.
- Resource Optimisation: Streamlining tail spend processes frees up valuable resources within procurement teams. Procurement professionals can redirect their efforts towards strategic initiatives that drive innovation and growth.
- Visibility and Control: Managing tail spend provides increased visibility into procurement activities, allowing organisations to make informed decisions based on data-driven insights. Improved control over tail spend helps mitigate maverick spending and ensures compliance with procurement policies.
- Supplier Relationship Enhancement: Focusing on tail spend allows organisations to build better supplier relationships. Consolidated purchasing and predictable demand enable more favourable terms and stronger partnerships.
REFTECK’S ROLE IN MANAGING TAIL SPEND MANAGEMENT
- Spend analysis: Our experts use analysis tools to identify the low-value, high-volume purchases that make up their tail spend. This information is then used to develop strategies for managing and optimising tail spend.
- Supplier consolidation: We help our clients consolidate their suppliers for low-value, high-volume purchases so that they can get better deals and not have to deal with much paperwork.
- Contract negotiation: We negotiate contracts with our clients’ suppliers for low-value, high-volume purchases. This can help to lock in favourable pricing terms and can also help to improve supplier performance.
- Technology: Our experts at Refteck, use technology to automate the management of tail spend. It allows procurement staff to concentrate on more strategic tasks, thereby improving efficiency and accuracy.
- Training and Monitoring: In addition to these specific strategies, we manage tail spend by establishing clear policies and procedures, providing training, and continuously monitoring and evaluating.
READY TO SAVE BIG ON PROCUREMENT?
Tail Spend Management is the answer. Even a small cut in tail spend can mean significant annual savings. Optimise your expenses, strengthen supplier ties, and free up resources. Take advantage of potential savings. Contact us today!
RELATED EXPERTISE
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