Dynamic and personalized experiences to learn more about your tail spend and how to manage it.
Tail spend management is a $1.8 trillion problem in the United States alone, and the conversation around tail spend has been building over the past few years. So, what makes tail spend so significant?
Welcome to the first annual State of Tail Spend. In the past five years, tail spend has become an increasing area of focus for companies due to a number of factors including supplier risk, operational risk, and bloated costs. As new technologies and processes to manage tail spend come about, The Hackett Group conducted a study to highlight new tail spend trends and what is coming next.
Detailed guides and stories on the importance of addressing your organization’s tail spend.
The case for tail spend takes you through the benefits of managing your tail spend, as well as identifying major risks that can arise if tail spend is left unchecked. Explore the time, cost and operational factors that are influenced by tail spend and the major KPIs to track your success.
Discussions and presentations between procurement leaders on the importance of tail spend.
In the past five years, tail spend has become an increasing area of focus for companies due to a number of factors including supplier risk, operational risk, and bloated costs. The Hackett Group and Fairmarkit conducted a survey to help understand the changing landscape of tail spend and procurement departments are approaching it.
Discuss the Procurement Pulse Check Survey results and how to tackle tail spend and other 2021 challenges. Walk away learning about the latest trends for tail spend, talent, digital, and areas of focus for procurement leaders in the new year.
Optimizing tail spend is a major area of impact for procurement departments, but for many it seems like an unattainable goal. Learn from Walter Charles and Greg Tennyson, two experts in procurement, as they outline the keys to identifying tail spend and the benefits of having a sound management strategy.
Testimonials on how we've been able to help organizations address their tail spend.
Emirates Flight Catering identified tail spend as a significant and ongoing challenge. They were spending a disproportionate amount of time managing low value transactions and needed Fairmarkit’s real time analytics to help identify the performance of their buyers and suppliers and reduce their cycle time by 85%.
As part of a wider transformation initiative at the multinational telco giant, BT wanted to completely digitize its procurement function. Tail spend management was identified as a key candidate for savings and adding value.
AMPCO was seeking a solution to optimize its supply base, create cost savings, and gain buyer efficiencies. This led them to Fairmarkit, whom they now consider an extension of the team.
After separating from Thomson Reuters, Refinitiv embarked on a journey to transform its business and meet efficiency targets. Faced with managing thousands of suppliers in their tail spend, Refinitiv needed to add automation to the sourcing process and start getting more spend under management.
Cabot identified tail spend as an important candidate for improving the procurement function. Within just a month, Cabot was able to use the Fairmarkit solution and deliver on the promise of adding value throughout the entire organization.
Materion has automated its nonstrategic purchasing using Fairmarkit in order to optimize tail spend management. With an average savings of $48k per buyer since implementing Fairmarkit, Materion’s buyers are transforming their buying processes and reinventing their procurement culture.
After switching from a prominent, business process outsourcing (BPO) company to Fairmarkit, Univision vastly improved its visibility into nonstrategic spend. They now have greater oversight and are realizing over 15% in cost savings using Fairmarkit’s intelligent sourcing platform.
Fairmarkit revolutionized the MBTA's tail spend procurement process by digitizing its sourcing operations. This resulted in a reduction in source-to-award cycle times, 100% compliance with bidding regulations, and an average of $100K in monthly savings.
Short and detailed content highlighting tail spend and other related topics.
Tail spend, a concept that is common in procurement departments but rarely optimized, is finally getting its time in the spotlight. By having a sound tail spend management strategy, a procurement department can become a key competitive advantage for an organization.
We want to challenge a long standing business concept, that tail spend is too complex, too resource intensive to manage and as a result should be relegated to a lower priority. In our eBook, The Case for Tail Spend, we share that based on reported numbers that tail spend equates to $1.8 trillion dollar opportunity in the United States. Does $1.8 trillion sound like a small opportunity?
Tail spend, which is generally defined as the 20% of spend that makes up 80% of a company’s transactions, has long been neglected by procurement. The average transaction value and the sheer amount of resources needed to attack this has made prioritizing tactical and tail spend procurement impossible for most procurement organizations.
Every year, enterprises are leaving millions - if not billions - of dollars on the table and it has nothing to do with their core product or service. Believe it or not, it comes down to the way they spend money on “tail spend” items - things like laptops, janitorial services, office supplies, and yes, even toilet paper.
Gaining visibility into organization-wide spending requires good spend analytics. The ability to analyze spend helps companies make better business decisions when working with vendors and capturing previously unknown efficiencies in their procurement process.
Rogue spend is the bane of many procurement departments, sometimes accounting for up to 80% of all of a company’s invoices. But it doesn’t have to be that way.
Indirect spend is getting bigger, and that’s becoming a problem for procurement teams. McKinsey calculates that globally, indirect spend is growing around 7% per year. When indirect procurement costs rise, profit margins fall.
Spend management is an important practice that can help procurement teams reduce costs, drive growth, and improve the business’s profit margin. Yet when approaching spend management, companies often neglect to take their tail spend into consideration.
Most procurement professionals understand the importance of curbing tail spend—the myriad spot-buys and indirect purchases that fall outside procurement’s influence. But with so many other pressures on your team, how do you put together and execute long-term tail spend management (TSM)?
Last year we were excited when Gartner included Fairmarkit’s intelligent sourcing platform as a sample vendor in the Hype Cycle Procurement and Sourcing Solutions, 2020. We believe companies and technologies on this list are changing the status quo for the better. And this year, we think that disruption will continue.
It’s the talk of the procurement town these days, but you don’t have to go back too far in the profession’s history before the concept of tail spend was almost entirely missing from industry chatter.
In an economy where lowering costs can mean the difference between survival and success, most organizations have already found many of the obvious areas for savings. For procurement departments that have implemented cost-cutting measures this year, the low-hanging fruit of direct spend categories will likely no longer yield further savings.
The term maverick spend—with its connotations of rebellious gamblers and the Wild West—is an apt nickname for unmanaged tail spend as it brings to life the idea of people bucking procedure and doing their own thing when it comes to the procurement function.
We all know the old marketing axiom that “80% of sales come from 20% of customers.” You might also know that this “law of the vital few” came from Italian economist Vilfredo Pareto, who first noticed the dynamic by observing in 1896 that 80% of land in Italy was owned by 20% of Italians.
Definitions and examples of tail spend as well as other related terminology.
Tail spend is often defined as the money a company spends on purchases that account for roughly 80% of total transactions, which makes up about 20% of the company's spend by volume.
Maverick spend — sometimes called rogue spend — refers to any purchases that don’t follow the organization’s established procurement rules and procedures. Maverick spending is the result of either deliberately ignoring procurement processes or of a purchasing mistake that doesn’t align with previously negotiated purchasing terms.
Unmanaged spend, tail spend, rogue spend, maverick spend: no matter what you call it, it’s all a type of spending that puts an organization’s bottom line at risk. Unmanaged spend is the result of procurement processes that are too complex, too archaic, or too inefficient.
Managed and unmanaged spend, naturally, require different approaches. Procurement teams simultaneously must try to optimize managed spend by managing supplier relationships, practicing strategic procurement, and monitoring the procurement cycle for inefficiencies. Meanwhile, teams must also identify unmanaged spend and try to reduce its negative impacts.
Expense management is related to spend management, in that it refers to the processes and tools a business uses to authorize payment for employee-initiated expenses. Travel, business lunches, and other types of indirect procurement require an expense management approach that minimizes waste and optimizes resources.
Indirect procurement refers to supplies and services that keep the business running: Spending categories such as facilities, utilities, maintenance services, HR, and office supplies.
Gartner’s definition of cost optimization is, “a business-focused, continuous discipline to drive spending and cost reduction, while maximizing business value.” Put simply, cost optimization seeks to find the best price and terms for business purchases, while standardizing, digitizing, and automating applications, processes, and services to save costs.
Category management is an approach to organizing procurement to focus on specific areas of spend. This process strategically segments spend into areas with similar or related products.
As technology transforms procurement, organizations are better able to use data to unearth and resolve inefficiencies in their sourcing process. Many organizations are spending this year focusing on tail spend: unmanaged or off-book purchasing that can quickly drag down a company’s bottom line.
A spot buy is a purchase that is unplanned, often considered an “emergency” or a one-time buy. Just like with any other type of spend, it is important to keep spot buys in check.
Spend management can help procurement teams reduce costs, drive growth, and improve the business’ profit margin. Spend management involves overseeing supplier relationships to build long-term value, as well as tracking the procurement budget to make sure each dollar spent is used for maximum value.
Spend analytics or spend analysis is the process of identifying areas where you can cut costs, improve strategic sourcing, and ultimately reduce expenses throughout the procurement process.
Source to pay, commonly abbreviated as S2P, is a piece of the procurement process that uses digital solutions to source products and services. While Source to Pay includes everything contained under the definitions of P2P, it also involves the sourcing of products and services.
Smart procurement refers to the use of technology to make manual, labor-intensive procurement processes more efficient. Smart procurement tools may use machine learning, artificial intelligence, IoT, and advanced data analytics to make procurement easier, more accurate, and more streamlined.
A purchase requisition is a formal document used to purchase something needed at your company. The purchase requisition is filed with the department manager or procurement team to kick off the process of purchasing the good or service. The finance and accounting teams also use the purchase requisition for reporting and compliance purposes.
Procurement innovation is a broad term that can encompass many different things. In fact, experts at the Public Spend Forum have identified at least four different aspects of “procurement innovation,” covering technology, strategy, processes and more.
Procurement analytics offer the key to long-term, sustainable growth, according to research by a number of consulting firms. EY found that with the right metrics, organizations can transform procurement from a traditional cost-management activity to a competitive advantage.
MRO is a category of spending that covers all maintenance parts used for repairs and to support production at an organization. MRO, despite being vital to operations, is considered part of indirect spending. MRO procurement includes things like office and cleaning supplies, computers, and items related to maintaining tools needed for production.
Invoice management is an internal process that covers all activities related to managing and processing invoices received from vendors and suppliers. The simple version of the invoice management process includes receiving an invoice from a vendor, validating it, paying the vendor, and recording the payment.
Budget management refers to managing the revenue and expenses of a company or internal department over a specified, future period. For instance, the finance team may set forth a quarterly budget that internal teams need to abide by; as a result, the team manager will control expenses, grow sales, and find cost savings according to that budget.
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