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Tail spend - What Is Tail Spend & How to Overcome It!

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Tail spend is a term that is gaining more attention recently. Tail spend refers to everyday business and professional services that fall below the radar of large, multi-year, outsourced services. …

Tail spend is a term that is gaining more attention recently. Tail spend refers to everyday business and professional services that fall below the radar of large, multi-year, outsourced services.
Due to these projects and services falling below the larger deals, they often get pushed to the back burner or even ignored completely.
Dealing with tail spend can save thousands of dollars and hours in manpower.

How can you be a tail spend champion?

Published in: Business, Technology

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  • 1. How To Be A Tail Spend Champion
  • 2. What is tail spend? Tail spend refers to the everyday business and professional services that fall below the radar of large, multi-year, outsourced service strategies. For small businesses this typically represents services projects valued at below $10,000. For medium sized businesses it is often services under $75,000 and for larger businesses up to $200,000. 80% 20% Spend Spend 20% Suppliers 80% Suppliers
  • 3. How does it affect you? The term tail spend is derived from the Pareto principle, which asserts in this instance, that 20% of an organisation’s suppliers will account for 80% of its spend. Conversely, 80% of their suppliers will account for 20% of spend. It is this ever-thinning series which figuratively draws into a long tail. Stack this long tail up and it’s often your biggest supplier.
  • 4. Why Tail spend is often mishandled The challenge is that buyers of such services are struggling to source and procure effectively from the mass of small and medium service providers, and the large service providers can no longer deliver such bite size projects cost effectively. ● Poor data visibility ● Lack of effective controls ● Constrained supplier lists ● Seemingly low potential savings ● Lack of interest from other stakeholders ● Lack of category expertise Tail spend is often mishandled due to:
  • 5. The Cost of Tail Spend Tail spend commonly comprises around 10% of an organization’s indirect procurement spend. It is commonly accepted that the waste in tail spend ranges from between 15%-20%, £1bn indirect spend = £100m in Tail Spend Commonly Accepted Waste in Tail Spend 15% - 20% £15m - £20m Wasted each Year
  • 6. Do you have a problem? If two or more of the following statements apply to your procurement situation, you need to get a grip on your tail spend: 1. The number of suppliers that your company has is greater than the number of employees 2. Two thirds or more of suppliers account for only 5 percent of spend 3. Less than 70 percent of orders are negotiated by procurement 4. More than 10 percent new suppliers added each quarter 5. Less than 50 percent of transactions are with preferred suppliers 6. Less than 50 percent of purchases are automated— e.g., through catalogues.
  • 7. Managing tail spend Managing tail spend is not easy, but there are platforms that can help you trim and manage all of your tail spend. blur Group’s cloud based s-commerce platform lets you source suppliers from a community of over 40,000 experts, and manage each project with it’s own project space. Brief Pitch Project Deliver
  • 8. Be a long tail spend champ! Brief the Global Services Exchange and take control of your long tail spend. Find out more about tail spend and how to manage it with our free white paper.