Managing tail spend has been a major topic of discussion among sourcing professionals for at least the past two decades. In most companies, external spending has a Pareto-like distribution – the largest 20% of suppliers (by dollar volume) typically account for about 80% of the total external spend. Tail spend is generally defined as the 20% (or so) of the total external spend that is attributable to the smallest 80% of suppliers.
For organizations looking to identify cost savings, increase profitability and get a leg up on the competition, indirect spend management is an ideal place to look. Often considered the backend of procurement – involving expenses like IT services and equipment, professional services, office supplies and HR services – indirect spend actually accounts for a significant portion of overall spend.
Training a company’s team members is a foundational step in running a company, one that is often forgotten when busy times hit. It shouldn’t be. Putting the time and effort into designing a training program that suits the unique needs of procurement will drive more effective results in less time. Employees will be better equipped to manage the various situations and surprises that sourcing across numerous categories brings about.