Given the breadth of products and supplier relationships that procurement is in charge of, strategic procurement is not always possible. Many companies either don’t have the time or the capabilities to make all procurement strategic. Consequently, this is where unplanned spot buys come in.
But what is a spot buy? Spot buy is a purchase that is unplanned, often considered “emergency” or a one-time buy. Just like with any other type of spend it is important to keep spot buys in check. Due to their nature, many companies struggle to control these purchases and it negatively affects their bottom line.
A closer look at spot buying
Spot buys are purchases which are not a part of your long-term plan. The easiest way to explain them is to take a look at their defining features. A spot buy usual includes at least one of the following characteristics:
- Spot buys are usually one-off deals and frequently involve some kind of an emergency. For example, your PC monitor breaks down and you need a new one ASAP.
- Individual spot buys are low-value. That is precisely why many companies don’t give them enough attention, but these costs add up over time.
- They are often unique buys, such as a last-minute purchase made for a very specific event.
- They forgo the RFP process, meaning they are less formal and often made in a short amount of time.
Broken: Spot buy catalogs
Now that we know exactly what spot buys are, we can understand why spot buy catalogs fail to work. In short, spot buy catalogs are online marketplaces which collect these offers in one place. This is in the hope that emergency searches are quick and that prices can be compared for a given item in a short amount of time. And while spot buy catalogs made sense fifteen years ago, they are now seen as ineffective, a waste of time and miss obvious savings.
The problem is that simply loading offers for low value purchases into a searchable catalog is only a tool, not a solution. Beyond that they often create more problems than solutions due to their time commitment and need for manual updates, leaving customers frustrated when they’re down to the wire.
An effective solution: Tail spend management
While spot buy may sound similar to tail spend, tail spend is much more comprehensive. Tail spend includes all small to medium sized purchases, not just those that are needed in a short amount of time. And with this broader category comes greater opportunity for value.A proper tail spend management solution offers two advantages beyond a spot buy catalog: standardization and automation.
Tail spend management enriches your supplier pool and makes searches easier. However, you are still using the trusted method of collecting bids and choosing the best one. Therefore, you are able to follow standard internal procedure and have greater control.
Secondly, automation is what allows the previous point to work in practice. We mentioned that spot buys frequently need to be quick, and automated RFQs are how you get there. This means you can streamline the entire process and make the purchases you need on time, for the best price and with trusted suppliers.
The Clear Winner
We live in a very competitive world and this means businesses need to optimize their operation wherever they can. By optimizing your tail spend, you can control your future spot buys in the process. While spot buy catalogs are a step in the right direction, an effective tail spend management can give you all those benefits and more, providing a more comprehensive package.