{"id":26604,"date":"2016-03-03T09:00:07","date_gmt":"2016-03-03T14:00:07","guid":{"rendered":"https:\/\/simfoni.com\/?p=26604"},"modified":"2025-02-10T08:48:09","modified_gmt":"2025-02-10T13:48:09","slug":"what-is-tail-spend-management-and-why-does-it-matter-to-a-business","status":"publish","type":"post","link":"https:\/\/simfoni.com\/tail-spend-management\/what-is-tail-spend-management-and-why-does-it-matter-to-a-business\/","title":{"rendered":"What is Tail Spend Management and Why Does it Matter to a Business?"},"content":{"rendered":"
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Tail spend<\/span><\/a><\/strong> refers to all the unmanaged high-volume and low-value transactions that take place within an organization. Tail Spend Management<\/span><\/a> Solutions<\/strong> by Simfoni actively manages maverick spend<\/span>ing<\/strong> by consolidating 80% of suppliers<\/strong> who account for 20% of<\/strong> procurement<\/a> spend<\/strong> and thus positively impacts the firm’s financial performance due to its impact on operating margin<\/span><\/strong>.<\/em><\/p><\/blockquote>

Management of spend across a business is always the responsibility of all Procurement and sourcing<\/strong><\/a> professionals. Most of the procurement department’s energy is focused on the top 20% of their supplier relationships as this usually accounts for about 80% of their company’s spend, ie the 80\/20 Pareto rule.<\/p>

But then what about the remainder of it? Almost all sourcing<\/a> stars tend to ignore this seemingly invaluable volume of spending even though these transactions take place with the bulk of their suppliers. We understand that there is a chance to take advantage of the untapped value that sits within this unforgotten category generally described as Tail Spend<\/span>.<\/p>

What is Tail Spend<\/span> and how can you manage it? <\/strong><\/h2>

Tail spend<\/span> refers to all the high-volume, low-value transactions that take place within an organization which is normally unmanaged by the procurement guys. Chirag Shah, Chairman of Simfoni provides his viewpoint on Tail Spend<\/span> and what it entails<\/a>: ‘’At a headline level, I think most procurement folks are now familiar with the concept of tail spend<\/span> – the low-value spend items that are non-core but still essential to the smooth operation of an organization. And of course, as the segment matures, even the tail itself comes under greater scrutiny or micro-segmentation with expressions such as tip of the tail, tail of the tail, mid-tail, tactical spends, spot buys, catalog buys, guided buying<\/span>, “precision buying” (Simfoni’s own attempt to join the party!) and so on.’’<\/p>

In nearly all corporations, nobody typically actively manages the tail. The procurement department might however put in place certain processes, strategies, or techniques for buyer<\/span>s to adhere to. This is commonly known as a “set and forget” tactic. When we talk about ”buyer<\/span>s” we refer to any individual within the business who utilizes the business’s money by making a low-value purchase. An example of these purchases could be anything from, a salesperson ordering a printer, a HR employee coordinating and booking a hotel for a business trip, or the office manager ordering a celebratory cake for a team celebration.<\/p>

Purchases of such ‘’low-value’’ are normally placed either via email, telephone, apps, or on a third-party website which indicates that they are unclassified and practically hidden from the procurement force. Spend in the tail, therefore, consists of these one-off type purchases or transactions that hardly take place often enough to be added into the cataloged system. Furthermore, not many businesses are aware of just how much capital is involved, let alone knowing how to handle it in a way that allows them to realize possible savings and deliver overall business value within the organization. A considerable number of firms also think that they are in control of all purchases which are of high priority and ultimately end up ignoring the tail – with a substantial percentage of their total spend made up of purchases under a certain level; of course, this differs from company to company.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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\n\t\t\t\t\t\tLearn more about
The Best Method to Curtail Tail Spend<\/span>\t\t\t\t\t<\/h2>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\tSimfoni’s Spend Automation is a technology platform with an Integrated B2B Marketplace<\/a> and BuyDesk sourcing services. Spend Automation™ Platform has everything you need to automate, control and optimize all types of spend across your organization.\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\n\t\t\t\t\t\tRequest a Demo on Spend Automation\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t
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One of the most challenging aspects of managing and taming this spending is the lack of visibility when it comes to data. The reasons for this can vary – from working with several suppliers to purchasing and contract teams operating on separated systems.<\/p>

Stage 1: Understand the theory. <\/strong><\/em><\/p>

Tail spend<\/span><\/a> can comprise of anything from misclassified purchases to maverick spend<\/span>ing. This is why it is especially crucial that a business is able to identify tail spend<\/span> and ultimately establish where it is transpiring within the business. To determine this, you would need to first start by extracting your data from all sources and then examine it, once this part is done you are then able to accurately classify your company’s definition of overall tail spend<\/span> and finally assess it based on these grounds.<\/p>

From here you can then section out the products or services and start your process of exploring possible opportunities to save through reducing cost at both transactional and spend level.<\/p>