The four ‘S’s needed for a successful tail spend project

Paul Snell is managing editor at Supply Management
15 October 2015

Purchasers embarking on a project to tackle tail spend should include the four ‘S’s to make it a success.

David Osborn, interim procurement director at Shanks suggested this at the CIPS Annual Conference in London.

He joined the waste management firm, which spends around £120 million a year in the UK, just over two years ago and set up a procurement function from scratch.

The company appointed Xchanging to handle the firm’s tail spend, as 25 per cent of spend is with 95 per cent of the company’s 1,000 suppliers. “It’s a huge opportunity if we can manage that large number of relatively low value suppliers better than we traditionally have done,” Osborn said.

The four ‘S’s he highlighted were:

• Staff engagement. When the programme began employees could be divided into three categories; supporters, detractors, and agnostics. This last group is the target audience, said Osborn.

“Focus your energy on the people who don’t know what it is going to do. Spend a lot of time talking to with them, making them understand, involving them, engaging them. The real hard work at the beginning of this programme was managing the staff and getting them to understand what we were doing and why we were doing it,” he said.

He also recommended finding quick wins. “There is nothing better than going to see an operator who doesn’t want to do this and showing him an instant win. If you can find those you change the agnostics into supporters very quickly,” Osborn added.

• Supply chain. Don’t impose the change on the supply chain, he advised. “Emphasise the carrot and not the stick. This is not about beating people up to reduce price. For us it was about giving our supply chain opportunities to understand who Shanks really are.”

The firm held supplier conferences and cautioned careful use of the term 'tail-end spend'.

“There is nothing more disingenuous than to tell them they are at the tail-end, “ he said. “When you are engaging with them they are important to you, and they want to know they are important to you. If you can have a debate on that level you will get much more out of them.”

• Systems. Shanks’ project was delayed by the fact it took much longer to get data from across the business. “Get your systems right and understand your data or you won’t launch a tail-end programme, or you will launch it in the wrong way,” he told delegates.

• Sponsorship. Support from senior management, in this case the managing director, was vital to keep the project on track.

“When the agnostics are starting to become detractors, and detractors are getting loud, you need someone with a lot of weight to turn the situation around, and our MD was a real agent for change. Without him, this wouldn’t have been the success that it is,” he said.

In the same session, Gonzague de Thieulloy, global head of tail-end spend services at Xchanging, said the biggest challenge in a project like this was behavioural change required in the organisation.

“If you work in an organisation where procurement is already covering, or is close to, 100 per cent of the spend, you aren’t going to see a big change,” he said. “If you are only managing 70 per cent of your spend that is going to be a challenge because the last 30 per cent is a lot of transactions and a lot of interactions with your stakeholders, so change management is key.”

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