What is the Tail Spend in Procurement?
Tail spend which can often be referred to as rogue spend or maverick spend, is usually small value purchases that are conducted by the organisations outside of a contract and often outside of the awareness of the procurement team.
These small low value transactions whilst often undertaken by a department in all innocence in order to speed up a need within the business can often have consequence for the procurement, finance and warehouse team, who are often left to reconcile paperwork, locate the arrival of stock, and identify who has undertaken the transaction.
Transactions conducted outside of contract leave the organisation exposed to risk of none compliance. So what are the possible solutions that procurement can bring to the organisation to help speed up the procurement process and allow colleagues to purchase low value items?
How can the procurement team manage tail spend effectively?
- Extract spend date from the organisations accounts
- Run a spend analysis the pareto principle will support with this activity
- Undertake a supplier positioning exercise, this will support the identification of critical and none critical suppliers, low value/low spend items can be identified
- Provide clear information to the organisation on what value they can spend and with who, before they need to notify procurement of the spend
- Provide the organisation with the tools to make risk reduced transactions
What are some of the tools procurement can offer the organisations to manage tail spend?
- Online ordering through electronic catalogues
- Procurement cards issued to users
- Electronic commerce through the internet i.e. e-Tendering, e-Auctions, e-Contracting, etc
- Consortium buying
- Supply base reduction
- Purchasing process redesign efforts
To find out more about this subject read the full knowledge paper: How procurement can identify and manage tail spend.
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