State of
Tail Spend

Study by:

A woman looks at data on a screen.
1

Tail spend has stepped into the spotlight and become a priority.

Over 75% of respondents said that managing tail spend is a priority within their organization, with almost half of those respondents identifying it as a top priority.

This trend is continuing to grow. Almost 3/4ths of respondents noted that the importance of tail spend as an initiative is growing and very few see it slowing down any time soon.

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2

Tail spend makes up a significant portion of a company’s budget.

It’s no wonder tail spend is a priority. Over half of the companies that responded said that tail spend comprises over 10% of their annual spend—that’s a lot of cash!

A man stands in front of a pie chart.
3

Tail spend has an overwhelming number of suppliers.

Unsurprisingly, the majority of respondents reported that over 80% of their suppliers were within their tail spend but almost 20% said reported this figure to be over 90%. This vast number underscores how critical it is to get the tail under management.

Hands point at a pie chart on a clipboard.
4

Tail spend savings have traditionally been behind non-tail spend savings.

While respondents recognize the importance of managing tail spend, almost two thirds of respondents have seen minimal savings (<3%) with their tail spend management programs thus far, compared to the savings they are seeing in non-tail spend (80% see over 3% savings).

A woman holds a coin in front of a rising graph.
5

Substantial savings are achievable through proper tail spend management.

Almost 60% of respondents believe that 7%+ savings are achievable, which is much higher than the <3% savings they are currently experiencing. This leaves plenty of room for potential savings.

A robot holds a key in front of a graph.
6

Right now, traditional methods are being used on tail spend.

Traditional tools such as electronic requisitioning and catalogs are the most common ways that respondents are trying to manage their tail spend. While these methods have led to success for non-tail spend, there still is a lot of opportunity to adopt automation tools and B2B marketplaces as a way of unlocking those savings in tail spend.

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7

Dirty data and lack of visibility make managing tail spend difficult.

The top challenge in managing tail spend was a lack of data integrity and visibility, with half of respondents agreeing it was getting in their way.

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8

Visibility is hard to come by.

Half of respondents have little to no visibility into their tail spend—25% of spend or less. With that lack of clarity, it is not surprising that companies are having trouble driving proper tail spend management.

A man uses a magnifying glass on a chart.
9

Managing end user behavior adds to the challenge.

As the second most common challenge, 40% of respondents stated that difficulty managing end users also prevented them from properly managing tail spend. Combined with the level of effort required, and the lack of tools to help them, no wonder most were seeing minimal savings from their tail spend management efforts.

A hand sets a trap with money as bait.
10

Improvements will come from reigning in non-compliant spend.

70% of respondents believe that reducing non-compliant spend, also known as maverick spend, is the biggest driver for improving tail spend. Not surprisingly, getting better spend visibility, which is a direct outcome of reducing rogue spend, was second.

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11

The opportunity lies in how maverick spend is brought under management.

It’s safe to assume that respondents will be prioritizing reducing non-compliance in their efforts to optimize savings since it was identified as the major driver. In order to accomplish this, there’s an opportunity to look towards new, non-traditional tools and practices that are not being leveraged broadly.

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Complete Survey Results

What is your company's primary business activity?

How much total annual spend does your company have?

How would you characterize the priority of tail spend management for your organization?

Over the last year, how has managing tail spend evolved as a priority for your organization?

What percentage of your total annual spend do you define as tail spend?

What percentage of spend cost reduction are you achieving annually in your tail spend?

What percentage of spend cost reduction do you believe is “achievable” in your tail spend?

What % of your tail spend do you have visibility and clear understanding of the purchasing activity?

What percentage of spend cost reduction are you achieving annually in your non-tail spend?

The number of suppliers in your tail spend as a percent of your total number of suppliers is closest to…

What do you regard as the main drivers for improving tail spend management?

What are the top challenges in managing your organizations tail spend?

Which of the following tail spend management practices are you piloting, or have already implemented?

How many ERP/P2P systems do you have?

What is your position within the organization?

How do you characterize your total spend?

This study was conducted by The Hackett Group, Tail Spend Management Survey, 2021