Tail Spend refers to all the unmanaged high-volume and low-value transactions that take place within an organization. These are the canonical “nickel and dime” purchases that can add up over time, but often take just as much operational work as large, strategic purchases. Tail Spend Management actively manages this maverick spending by consolidating with a reverse 80-20: up to 80% of suppliers can account for 20% of procurement spend. Streamlining here can positively impact a firm’s financial performance due to its significant impact on operating margin.
Today, procurement departments face immense pressure to conduct responsible purchasing when commodity prices are volatile, and supply market risks are elevated. And while tail spend is a familiar concept for procurement groups, it’s challenging to correctly optimize.
Regardless of size, every organization has encountered tail spend issues whether they realize it or not. What can seem harmless in small doses, having your tail spend management under control can become a key competitive advantage.