5 marks of companies that manage tail spend effectively

October 9, 2019

By its very nature, tail spend is often the final frontier for companies looking to get their corporate spending completely under control. This is because tail spend comprises the 20 percent of purchases that result in 80 percent of vendor interactions, which often makes managing this portion of spend feel like a luxury for procurement teams in search of bigger fish to fry.

When companies finally make the leap to address tail spend, it typically is not a spur-of-the-moment decision. Rather, it is often one of the final steps in a continuous process of steering a business toward a fully-optimized state.

With that in mind, here is a list of the five observable traits within companies that manage their tail spend effectively.

Seamless Communication

Tail spend is one facet of procurement, which is the process of acquiring everything a business operation needs in order to conduct its daily, weekly, monthly and yearly activities. This includes everything from the acquisition of resources and machinery required for the manufacturing of products to the purchase of the computers, pencils and highlighters used by the office staff. In order to coordinate processes from the initial incoming delivery of resources to the final outbound shipment of finished products, an abundance of internal and external communication is necessary. Even to get to the point where tail spend management has become a priority, a company relayed messages up and down its chain of command, and also across several departments. As a result, companies that have managed their tail spend are marked by a profusive exchange of valuable information and ideas.

Technologically Savvy

The process of getting to the essence of tail spend management requires a data-driven, technology-based approach to squeezing out savings. Companies that employ software-derived solutions to manage their tail spend clearly recognize the advantages of data analysis, as well as the latest means for capitalizing on that data. As you can imagine, companies that incorporate this sort of software tend to do so across multiple areas of execution, and the result is a workplace where a data-driven approach is broadly applied, and specialized software is used to the benefit of every department in the organization.

Empowered Employees

If a company makes use of software that optimizes tail spend and applies technological strategies to other areas of its operation, there is no doubt that its employees are knowledgeable and engaged professionals. This is because interacting with software allows employees to gain knowledge and confidence in their performances that would otherwise go unacquired if these same employees were simply winging it. The process of learning and mastering new forms of software also provides employees with resume items they can use to market themselves in the future, thereby permitting workers to feel as if their company is fully invested in their skill-set development and future happiness.

Efficient Operations

One of the benefits of managing tail spend is the recovery of resources that can be utilized more efficiently elsewhere within the operation of business. Since the business is already marked by improved communication, that means the monetary needs of each department and the timelines for the development, production, escalation and discontinuation of products will involve timetables that each person in the organization is well aware of. Therefore, as more monetary resources are made available through tail spend management, there will already be some level of universality to the agreement of where those resources can be best utilized, thereby increasing the overall efficiency of the operation.

Detail Oriented

Tail spend management requires companies to focus their methodologies on extracting every last ounce of savings from their procurement processes. While in some cases this might be the result of forward thinking by members of procurement teams wishing to do their utmost to generate value for the firms that employ them, more often than not, this mindset is the result of a top-down approach within the entire company to maximize opportunities and savings in all areas of operations. Therefore, if your business is searching for opportunities to save money in the tail spend category, this likely reflects a preexisting corporate culture geared toward constant improvement on all fronts.

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