{"id":26505,"date":"2015-08-01T19:06:44","date_gmt":"2015-08-02T00:06:44","guid":{"rendered":"http:\/\/simfoni.wordjackcloud.com\/?p=26505"},"modified":"2025-02-10T08:47:26","modified_gmt":"2025-02-10T13:47:26","slug":"understanding-tail-spend-what-it-is-why-you-care-and-whats-to-be-done","status":"publish","type":"post","link":"https:\/\/simfoni.com\/tail-spend\/understanding-tail-spend-what-it-is-why-you-care-and-whats-to-be-done\/","title":{"rendered":"Understanding Tail Spend \u2013 What it is, Why you care and What\u2019s to be done"},"content":{"rendered":"

If you’ve been reading the procurement<\/a> trade publications<\/strong><\/em> over the past year, you will have noticed a lot of discussion about the importance of understanding and managing tail spend<\/span><\/strong><\/a> in large or geographically dispersed organizations.   The fact that tail spend<\/span><\/a> is getting so much attention highlights two notable shifts in our space:<\/p>\n

Firstly, it represents a significant change in the mindset of procurement professionals as in the past, resources did not allow them the time or tools necessary to shine a light on low-value spending.  As such, even the most diligent procurement professionals were forced to focus their energies only on the 20% of suppliers that represented 80% of their costs.<\/p>\n

Read More –<\/strong> 6 Ways to Support Supplier Diversity<\/span><\/strong><\/a> by Increasing Supplier Spend to Minority-owned, Diverse and Small Businesses.<\/p>\n

The second shift is a technological one.  The proliferation of new technologies including enterprise software and real-time communications has enabled organizations to get a better insight into their tail spend<\/span><\/a> and, as a result, identify the opportunities it represents for maximizing profitability.<\/p>\n

Tail spend<\/span> is traditionally defined as the ~20% of an organization’s spend that is derived from ~80% of their suppliers.  Because these purchases are often too small or infrequent to be managed by procurement they do not benefit from the proven techniques associated with a more deliberate purchasing approach. Read More:-<\/strong><\/span> Purchase Price Variance<\/strong><\/a><\/p>\n

The challenge with tail-spend<\/strong> is that there is a lot happening within that bottom 20% and without the right systems in place it can be very difficult to manage. A lot is made of the fact that the tail is where maverick spend<\/span>ing hides – and that’s an issue – but it’s much more than that.<\/p>\n

Tail spend<\/span><\/a> can also include: Understanding Tail Spend<\/span><\/strong><\/em><\/h3>\n