Organizations understandably focus on big-dollar strategic spend, critical contracts and key suppliers. Indeed, as shown by the Pareto principle, 20 percent of an
organization’s spend accounts for 80 percent of the value impact.
Tail spend — the remaining spend — isn’t considered strategic.
It encompasses low- and high-dollar items in a range of
categories, and often includes areas beyond the direct control
of procurement. It can be ( 1) indirect spending done in field
offices outside of normal procurement methods, ( 2) services
contracts that are renewed annually without review or competition
or ( 3) buys for technical equipment that may be considered
so complicated that they are handled by end users without
consultation with the acquisition area.
Tail spend is often given such labels as “unmanaged,”
“fragmented,” “invisible,” or “nuisance” spending. It’s often talked
about — typically from an explanatory perspective — but seldom
But tail spend is more than just a label. It can provide cost-savings opportunities and efficiencies. It can, however, be harder
to manage than strategic spend. Also, there is no consensus as
to how the procurement function should tackle it. Organizations
that try to manage tail spend generally think it’s better handled
by someone else, and many turn to software providers or
consultants for solutions.
By tackling tail spend in-house, supply
management organizations can create
value with little or no money out of pocket.
BY DAVID C. WYLD, DBA
TAIL SPEND TO