Of the long list of Procurement’s to-do, reducing Tail Spend costs doesn’t often make the list of top priorities.
Defined as spend that occurs off-contract or is not actively managed, Tail is often viewed as low value. In other words, in the grand scheme of sourcing and cost reduction initiatives, it is overlooked. With increasing pressure on sustained savings, mature procurement teams are giving tail spend another, longer look. In our experience, Corcentric clients are taking their approach to spend management a step further. Beyond tackling indirect and direct spend, they’re challenging the preconceived notion of this “low value” spend to drive visibility, reduce (and even eliminate) transactions costs, and implement opportunities for sourcing savings.
Taking charge of Tail Spend, isn’t without it’s challenges – especially in regards to data quality and its management. Spend analyses are a significant undertaking for categories that are well managed, let alone spend that occurs sporadically across an organization via p-cards and other methods. Misspellings, duplicate data, and missing data linkages all make for a lengthy process of cleansing and categorization. Other challenges include:
- Limited Systems Integration: Inadequate integration between procurement and contract management systems makes identifying off-contract / non-contracted data difficult.
- Complexity: Tail Spend is often characterized by its high number of sub-categories, sheer volume of line items, and a substantial number of suppliers.
- Silos: Decentralized purchasing practices, policies, and processes also contribute to rogue and tail spend. Gathering the spend data from disparate operating systems requires significant effort, resources, and time.
Despite these challenges, companies who are able to tackle their Tail reap the rewards from cost reduction, cost avoidance, and increased contracted spend to the standardization of purchasing processes across the business, and increase in supplier relationship management. How they’re able to make this happen varies on the size of the company and the maturity of their procurement organization.
On December 9th, Corcentric’s Anthony Mignogna will lead a conversation on answering Effectively Managing Tail Spend during Consero’s Procurement and Sourcing Forum. Leading a panel of Procurement leaders from companies such as Regeneron Pharmaceuticals, Herman Miller, Venanpri Tools Group, and more, to cover what more can be done regarding tail spend. Panel attendees will walk away with lessons learned in both what to do and what not to do when addressing this area of spend, and the available tools to enable success.
