Tail spend can be defined as any business purchase that falls outside of the norm. Often they are small and fragmented and transactional, including one-off purchases with a large number of suppliers.
Often undertaken by departments with the best intentions to meet the immediate needs of the businesses, they often can have consequences of increased risk through using unverified suppliers as well as additional cost. Where economies of scale are not being met and pricing is not fully negotiated.
In many cases the cause a level of business disruption as the procurement, finance are left to reconcile paperwork, and warehouse teams have to locate and allocate the new stock.
Typically tail spend can be 5-20% of total spend and will normally have one or more of the following characteristics:
Highly fragmented - With thousands of suppliers across multiple business units, managed in silos with limited, governance and visibility
Urgent turnaround - Often required quickly due to limited resources
Low value or high frequency spend - Which is not strategically managed or monitored because the spend per supplier is too small
Maverick or Shadow spend - Also referred to as Rogue or Out of Contract Spend these are purchases made without the awareness of the procurement department
One off or high value purchases - Typically around project work or uncommon business requirements
Uncategorised items - Line items that don’t happen often enough or are too low value to be included in the catalogued systems
Misclassified items - Line item wrongly classified through human error
Find out how Bell Procurement management team work with organisations to manage tail spend on behalf of clients with a unique proposition that actually removes cost and risk from the supply chain.
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