Tail spend initiatives: lessons learned

October 2, 2019

Tail spend management program rollouts are not always successful. As with most new programs, there are many technological and human factors that can make a tail spend initiative complicated. Despite this, there is one common thread that exists in every successful tail spend management implementation: the process was automated as much as possible.

There are three commonly present hurdles associated with these rollouts that are important to identify before starting a tail spend management initiative:

  1. Most approaches don’t allow for data to flow to and from an existing P2P system. As a result, these programs force buyers or end users to do a lot of manual cutovers, which slows down the requisition timeline.  
  2. Most approaches require buyers or end users to use complicated, or “clunky”, legacy procurement systems that are undesirable to use and time consuming.
  3. Most buyers or end users are not measured on cost savings, diversity vendor inclusion ratios, or speed of procurement. Consequently, all they really care about is if they have a backlog and how quickly they can obtain a product or service. It is tough to motivate people to adopt a strategy that is harder, takes longer, and doesn’t impact how successful they are in their role.

The three hurdles listed above explicitly highlight why automation is critical for success:

  1. Automate the data flow: It is necessary to automate the data flowing from your P2P to tail spend management software. Doing so makes leveraging artificial intelligence as easy as setting up a report and calibrating the frequency.
  2. Automate the decision to source: If the decision whether or not to source is placed in the hands of the end user, two things happen. First, it takes time to make that decision. Second, people have a tendency to err on the side of caution when it comes to sourcing.  Harnessing the power of structured data and rules-based logic to make decisions saves both the buyer and end user time while ensuring maximum cost savings.
  3. Automate the sourcing event: No procurement team can be efficient, effective and run an RFP for every non-strategic purchase. Using artificial intelligence empowers buyers to focus on strategic purchases and enables technology to source non-strategic purchases at scale without needing to add additional people to your team.

To clarify, automation should not replace your team. Your team is crucial for strategic and complex purchases and they are needed to make a value-based award on a sourcing event completed by an automated solution. No artificial buyer can digest and factor the unique circumstances around each sourcing event. Thus, finding solutions that empower buyers to be more efficient, while ensuring they can make final decisions, is crucial for implementing a successful tail spend management program.

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